LIBRARY OF CONGRESS. 

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ShelfJibjILS 

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UNITED STATES OF AMERICA. 



A NEW 



POLITICAL ECONOMY 



JOHN M.i>^GREGORY, LL.D. 

Ex-president of Illinois Industrial University. Ex-superintendent of Public 
Instruction for Michigan. 






VAN ANTWERP, BRAGG & CO. 

CINCINNATI. NEW YORK. 



ECLECTIC EDUCATIONAL SERIES. 



6 



^p 



i1 



(^ 



'f^ 



High School and College Course of Study. 



Gregory^s Political Economy. 
Andreivs^s Constitution of United States. 
Andrews's Elementary Geology. 
Norton's Elements of Physics. 
Norton's Natural Philosophy. 
Norton's Elements of Chemistry. 
Broivn's Physiology and Hygiene. 
Buffet's [Hennequin's'] French Method. 
Duffet's French Literature. 
Bartholomew's Latin Series. 
Holbrook's First Latin Lessons. 
Hepburn's English Rhetoric. 
Smith's Studies in English Literature. 
Thalheimer's Historical Series. 



White's Complete Arithmetic. 
Ray's New Higher Arithmetic. 
Ray's New Algebras. 
Ray's Test Problems in Algebra. 
Ray's Plane and, Solid Geometry. 
Ray's Geometry and Trigonometry. 
Ray's Analytic Geometry. 
Ray's Elements of Astronomy. 
Ray's Surveying and Navigation. 
Schuyler's Complete Algebra. 
Schuyler's Elementary Geometry. 
Schuyler's Principles of Logic. 
Schuyler's Psychology. 
Kidd's New Elocution. 



Descriptive Circulars and Price-List on Application. 



Copyright, 

1882, 

By Van Antwerp, Bragg & Co. 



DEDICATION. 



y^ This volume is affectionately dedicated to the several hundreds of 
former students for whom its studies were undertaken, and to whom, 
in the author's annual courses of lectures, its chief parts were first 
presented. 

The heart of the author has followed his pupils out into their various 
careers of honored usefulness, and now sends after them, this publica- 
tion, so often requested by many of them, as a token of his continued 
regard for their welfare, and his continued faith in the great doctrines 
of public well-being which he attempted to inculcateN^ Reminding 
them of a pleasant past, may it also afford them fresh pleasure in the 
midst of present work, and renew within them the generous feelings, 
thoughts, and purposes of the elder time. 



(3) 



PREFACE. 



The Author presents his work to the fair thinking among his 
countrymen, and especially to the teachers of Economic Science. This 
volume is the product of years of combined thinking and teaching, 
and is offered as a modest contribution to the growth of that science 
which seeks to explain and promote the industrial progress of the 
world. It is an essentially new statement of the facts and principles 
of Political Economy. It may seem absurd to expect any new discov- 
eries in a field whose earliest surveys are recorded in the theogonies 
of India, Egypt, and Greece, and some of whose grandest features 
were evidently seen by Moses, Plato, and Aristotle. But, though this 
field has repeatedly and perpetually been under survey by statesmen, 
publicists, and philosophers, whose attention has been attracted to the 
causes of human progress and well-being, it is presenting ever fresh 
phenomena, with the progress of mankind in arts and civilization, and 
demands, therefore, ever fresh study and statement. Even if the 
grander features of the great landscape do not change, one who sur- 
veys them from some new hill-top, to which his business or his tastes 
have led him, may be able to present them in new relations and with 
a fresh perspective. It is in these new relations and this new per- 
spective that the author believes his book will be found essentially 
new.yThe fresh views presented are chiefly the following: 

1. The clear recognition of the three great economic facts of Wants, 
Work, and Wealth, as the principal and constant factors of the indus- 
tries, and as constituting, therefore, the field of Economic Science. 

2. The recognition of man, and of the two great crystallizations of 
man into society and into states, as presenting three distinct fields of 

(V) 



vi PREFACE. 

Economic Science, each having its own set of problems, and each its 
own species of quantities or factors, to be taken into account in the 
solution of those problems. • 

3. A new definition and description of Value, as made up of its 
three essential and ever-present factors, forming the triangle of Value, 
and evidenced by the clear explanation they afford of the various 
fluctuations of prices. 

4. The new division and distribution of the discussion arising out 
of these new fundamental facts and definitions. 

5. The aid rendered to the reader and student by the diagrams 
and synoptical views. These, though somewhat artificial, will, it is 
hoped, be found to serve as a map to the territory to be traversed, 
and helpful to a better understanding of the true relations of its 
parts and divisions. 

It was the primary purpose of the Author to present to his country- 
men his views upon the subjects discussed. He hoped thus to con- 
tribute to the better public understanding of a branch of knowledge 
of great importance to intelligent citizenship. He has given his book 
a form adapting it also to the use of the schools and colleges, partly 
from the force of habit, and partly because he recognizes the truth 
that, through the schools, ideas flow, by wide and natural channels, 
into the currents of the nation's life. 

Without further explanation of his work, the Author cheerfully sub- 
mits it to the inevitable and, he hopes, candid judgment of his 
contemporaries. 



CONTENTS. 



CHAPTER. 

L 


Wants, Work, Wealth 






PAGE 

9 


II. 


The Three Economic 


Sciences 


17 


III. 


The Triangle of Value 






30 


IV. 


How Values Vary . 






. 46 


V. 


Measure of Value . 






60 


VI. 


Wants and Utilities . 






67 


VII. 


Demand and Supply 






77- 


VIII. 


Work 






. 89 


IX. 


The Gifts of Nature . 






97 


X. 


Labor — Strength 






112 


XL 


Labor— Skill . 






122 


XII. 


Intellectual Labor 






134 


XIII. 


Services . 






145 


XIV. 


Organization of Labor 




. 


152 


XV. 


Organization of Labor- 


—Continued . 


169 


XVI. 


Conditions Favoring Labor 


178 


XVII. 


Capital . 






187 



(Vll) 



Vlll 



CONTENTS. 



CHAPTER. 

XVIII. 


Relations of Capital and Labor 


XIX. 


Agricultural or Rural Economy 


XX. 


Exchange — Trade and Transportation 


XXL 


Trade 


XXII. 


Money ........ 


XXIII. 


Money — Continued . . . . . 


XXIV. 


Property ....... 


XXV. 


The Distribution of Wealth . . . . 


XXVI. 


Secondary Distributions of Wealth . 



197 

208 
228 

240 

250 
266 
284 
301 
319 



NATIONAL ECONOMY. 



I. 


The Natio 


Q and its Economics 


IL 


Taxation 


. . 


III. 


Protection 


and Free Trade . . . . 


To the ' 


reachers of 


PoHtical Economy 


Index 








333 
341 
362 

387 



POLITICAL ECONOMY 



CHAPTER I. 

"" WANTS, WORK, WEALTH. 

1. Definition. — Political economy is the science of the 
industries. Its aim is to investigate and explain the nature, 
relations, and laws of these three constant factors and elements 
of the industries — human wants, work, and wealth. 

Man is a being of many wants. Out of his wants springs 
his work to gratify them. Out of his work come the goods 
which he calls wealth. This is the simplest history of human 
industry\ 

In this industry, wants, wealth, and work are ever present 
factors. They are its essential and significant terms, and, with 
any one of them lacking, industry, in its full meaning, could 
not exist. Without wants, man would not work. Without 
work, no wealth' could come. If wealth — that is, goods — did 
not result, no one would work. Thus the three terms are 
involved in every full idea of industry. . 

2. Sphere and science of industry.-^The industries 
fill the world. They occupy the daily life of mankind. They 
feed and support the populations of the globe. They are the 
primary and principal element in civifization, and they fill the 
chief chapter in modern history — in all true history. Constitut- 

(9) 



lO POLITICAL ECONOMY. 

ing the largest and most conspicuous part of the personal life 
and social connections of mankind, they, more and more, as 
civilization advances, engage the attention and absorb the 
energies of communities and of statesA 

The study of these industries necessarily interests all who 
care for mankind, and it grows in importance with every ad- 
vance in their character, and with every enlargement of their 
sphere and power. It is the study of man and of society, in 
the largest field of their activities, and in the line of their most 
potential movements. 

The name, Political Economy, given to this science, implies 
the economy of states or nations, and has been properly ob- 
jected to as too restricted and inapplicable. Several other 
titles have been suggested and employed, but this has become 
familiar by long, popular use, and is now generally accepted 
as covering the whole field of economic science. It is better 
to follow the common usage without debate, than to discard a 
name which, however poorly chosen, a century's use has made 
significant. 

To gain a clear and complete view of this science, we must 
enter thoughtfully the wide domains filled with the incessant 
stir of daily working life. We must observe and question care- 
fully all the facts presented by the busy millions of men who 
are covering continents and oceans with their work, and who 
are conquering into use and service every form of matter and 
all the potencies of nature. 

We must watch the development of labor, from its rudest 
beginning in the savage, to its highest achievements in the arts 
of civilized fife. We must follow its triumphs, from the simp- 
lest fruit plucked by the child, to its mighty outcome in the 
commerce of cities, empires, and peoples. 

All the phenomena found in this great field, innumerable 
and varied as they are, will be seen to spring from a few 
simple forces, and to be controlled by a few principles, which 
it is the business of political economy to trace and describe; 



WANTS, WORK, WEALTH. II 

3. The factors described. — The first step in any science 
is to discover, if possible, the simple, elementary facts. If 
we look steadily into any part of the field before us, we 
shall see, gradually emerging from the wide confusion, the 
three primary facts named at the head of this chapter. The 
entire mass of phenomena ultimately resolves itself into these 
three./ Throughout the whole field, and at each point, how- 
ever simple, or however complex, the economic appearances, 
there will be : 

1. Man's wants. — These are the impelling forces which push 
forward the entire movement, and give direction and meaning 
to it all. They include the endless range and the ceaseless 
repetitions of human needs, desires, tastes, and appetites, 
physical or intellectual. They are the basis of all market 
demand — the compelling reason and final purpose of all indus- 
trial effort. 

2. Man's work. — This includes the actual movements in all 
arts, trades, and business. It comprises all the efforts which 
men make to create, procure, preserve, transport, or exchange 
the objects which satisfy their needs or gratify their desires — to 
secure pleasure or avoid pain. It covers the whole procession 
of industrial acts and efforts, of body and mind. 

3. Man's wealth. — This embraces all the products of work. 
It includes the great mass and countless forms of goods and 
possessions which come from the labor and tempt the cupidity 
of mankind, and which are the purposed aim and objects of 
all industrial efforts.X 

The word wealth is used, in pofitical economy, to denote 
goods or valuable things, without reference to their quantity. 
In common speech, it usually implies an abundance of such 
goods. It is sometimes employed for natural resources, as the 
wealth of the soil or of the sea. Some economists have ob- 
jected to its use because of this variety of meanings: but we 
must reject all common words if their loose colloquial or poetic 
use is allowed to spoil them for scientific purposes. 



12 



POLITICAL ECONOMY. 



/ 4. Field of economic science. — These three world-wide 
facts — want, work, wealth — thus understood and considered, 
fill the entire field of political economy. They are the funda- 
mental facts with which the science is concerned.* 

To impress this field more clearly at the outset upon the 
mind, let it be represented to the eye by the following diagram : 



FIELD OF POLITICAL ECONOMY OR ECONOMIC SCIENCE. 



MAN 



Human Society. 



Nationality. 



WANTS. 




WORK. 


' Needs. 
Desires. 
Appetites. 
Tastes. 
Demand. 


V « 


' Efforts. 

Industries. 
Arts. 
Trade. 
Business. 



WEALTH. 




In each of the primary facts, man must be understood as a 
constant and potential presence. It is not simply abstract 
wants, work, and wealth that economic science has to do with, 
but the humanity connected with them. It is the wanter and 
his wants ; the worker and his work ; the owner and his wealth. 
Man stands at the beginning of pohtical economy. Man, in 



* Years after the author had made and presented this grand division 
of the subject to his classes, he met, in the "Harmonies Economiques," 
by Fred. Bastiat, Paris, 1850, the sentence, "Wants, efforts, satisfac- 
tions — this is the circle of political economy." 



WANTS, WORK, WEALTH. 



13 



his great social and national organizations, stands at the end of 
it. It rises with his wants; it ends with his satisfactions. It 
sustains and penetrates his civilization, and is penetrated by 
every department of that civilization. 

5. Relations of the factors. — It is also important, and 
will prove useful, to note some of the more striking features 
and differences of these facts. 

1. Wants are motive forces. Work is productive movement. 
Wealth is material result. 

2. Wants determine the work to be done, by determining 
the products wanted. 

3. Wants exist in the mind alone, and can not be definitely 
measured. Work is force in action, and can only be measured 
by its results. Wealth is the material product of work and the 
object of desire, and takes its measure from both. 

4. Wants are original. The others are derivative. Work is 
want in struggle and conflict. Wealth is want in victory, in 
satisfaction, and repose. 

5. Wants look beyond work to its results. They intend 
wealth as their object; they accept work as a means.X 

6. The economic circle. — Some of the more important 
relations and reactions of these several classes of facts may be 
usefully represented to the eye by 
arranging them as sectors of a 
common circle — the great circle of 
man's industrial life. Each sector 
limits and is limited by the other 
two. 

In the natural or historic order 
of movement of our circle, indi- 
cated by the arrows in the diagram, 
wants impel work; work produces 
wealth; wealth satisfies and stimulates afresh the wants. 

But there is also a line of reactions moving in the opposite 
direction. Wealth once in existence aids and stimulates work; 




14 POLITICAL ECONOMY. 

work, by its threatened hardships, often represses desires; 
wants, by their presence, give to weahh its values. These ac- 
tions and reactions are constantly at work in the business 
world, and account for much of the phenomena it presents. 
As they will be more properly discussed in a coming chapter, 
they are not followed further here. 

7. Sectors of the circle. — Each sector in this economic 
circle both separates and unites the other two. 

I. Between wants and wealth lies the work necessary to 
their meeting. What a man wants he must work for, or give 
in exchange the products of work already done by himself or 
another. Work is the efficient mean between wants and their 
gratifications. 

2, /Between wealth as a good to be coveted, and work as 
an effort to be dreaded, come in wants, lending new attrac- 
tion to the object they crave, and new stimulation to the 
efforts they inspire. Wants constitute the reconciling means_ 
between a feared evil and a desired good. Men overcome 
their native indolence and go cheerfully to their toil so soon 
as their desire for the goods to be gained becomes strong 
enough.N 

3. Between wants as conditions of disquiet, and work as a 
condition of drudgery, the goods of wealth come in, giving 
force and activity to desire, and lessening the dread of toil. 
The impulsion of wants is thus helped to overcome the repul- 
sion of work, and the antagonism between them is for the time 
destroyed. 

All these statements are only so many different aspects of the 
same fact — the close interdependence of the three facts of 
want, work, and wealth. But each one of these aspects has its 
place in the history of industry. Sometimes the wants to be 
satisfied will seem to be the prominent and controhing phe- 
nomena; at other times work will fill the foreground; and, 
in other cases, the vision of the wealth concerned will throw 
both the others into the shadow. A failure to hold their 



WANTS, WORK, WEALTH. 15 

Strictly reciprocal character in mind has produced much confu- 
sion of thought. 

S/The three names of economic science. XrFrom the 

mutual relations and union of these three great factors of politi- 
cal economy, it is evident that the science might take its name 
from either one of the three. Thus, we might call it the 
science of man's economic desires or wants; or the science of 
work or of the industries; or, finally, the science of wealth. 
Under either title we should be led into the same field, though 
entering it on different sidesX Thus, in discussing the eco- 
nomic wants — that is, the wants whose gratification demands 
effort — we must necessarily consider the wealth which satisfies 
these wants, and the work which produces it. So, also, if we 
undertake the study of the industries, we must take into our 
view the desires which give aim and impulse to these indus- 
tries, and the wealth which it is their object to create. 

The title, ''Science of Wealth,^' has already been employed by 
J. B. Say, and by Count Pelegrino Rossi, his successor in the 
chair of political economy in the College of France; and it has 
been taken as a title for their books, by Prof. A. Walker, and 
Prest. Sturtevant, in America. 

From another point of view, J. Stuart Mill, De Quincey, 
Prof. Bowen, and others, have defined political economy as a 
mental and moral science, because built on the action of 
human desires, and taking its laws from them. These econo- 
mists would name the science from its causes or forces, as the 
others would from its effects or results. 

We might, with the same propriety, name it from work, the 
series of activities which lie between the cause and effect. 
The title. Science of Work, or Science of Industries,^ would 



*The Dictionary of Political Economy (Dictionnaire de L'Economie 
Politique, Coquelin & Guillaumin, Paris, 1873), under the question, "Is 
wealth the object of economic science, or is it industry, the source of 
wealth?" says: "C'est en realite le travail humain, I'industrie humaine, 



1 6 POLITICAL ECONOMY. 

need no more explanation to show its application to the field 
of Political Economy than does that of Science of Wealth. 

It is an obscure survival of the old feudal sentiment which 
worshiped wealth, but despised the labor which produced it, 
that prefers the title "Science of Wealth" to the "Science of 
Work." Certainly, to the unprejudiced eye of the statesman or 
philanthropist, wealth is neither so conspicuous nor so significant 
a fact as the marching armies of labor — the great fighting 
columns of industry. The man is greater than his possessions. 
The worker is a more important fact than the products of his 
work. The real business of economic science is to comprehend 
and guide human industry. It is the gospel of work, not 
merely of wealth. 

Since no single word can be found which will express at 
once, and in their true relations, the three chief elements and 
fields of our science, we must content ourselves with the old 
name, pofitical economy, putting into it, as we find them, all 
the truths and meanings which the science embraces. V 



source des ri chesses, qui fait I'objet des investigations economiques." It 
is, in reality, human labor, human industry, the source of wealth, which 
forms the object of economic investigations. Vol. I, p. 651. On the 
following page, the writer calls political economy: "La science des lois 
du monde industriel " — the science of the laws of the industrial world. 
And he adds that this title seems to him "nobler, more comprehensive, 
and more exact." 



CHAPTER II. 

THE THREE ECONOMIC SCIENCES. 

g. Man in economic science.— We advance now to a 
nearer view. The three world-wide, fundamental facts—human 
wants, work, and wealth — have been shown to constitute the 
broad field of economic science. We are now to see how 
this science divides into three. 

/We have affirmed that man must be understood as a constant 
and potential presence in political economy. The sciencejbe- 
gins^ ajid_emisjivith^ma,n — the wealth-seeker, the wealth-winner, 
and the wealth-owner. Hence, whatever great natural laws of 
development, organization, or change affect humanity will also 
affect the laws of man's wants and industriesN 

10, Mankind, society, nations. — Man appears to us 
under three great natural aspects: i. As mankind, or the ag- 
gregated humanity; 2. As human society, organized under the 
power of certain natural affinities and needs; 3. As nations 
organized for political ends and under political laws. 

Under the first we have simply the human herd — the great 
mass of individual beings, each with the simple wants, capaci- 
ties, and powers of a human being. Under the second, the 
herd appears organized with all the wants and conditions of or- 
ganized society added. In the third, we find the compact body 
politic — a sort of political person called the state, including in 
it individuals, and including also all phenomena of society. 

Each of these three aspects, or conditions of humanity, has 
its own economic phenomena and laws. Political economy, 

p. E.-2. (17) 



1 8 POLITICAL ECONOMY. 

therefore, will be marked by the same broad aspects and 
divisions, and will give us three sciences instead of a single 
one. 

Adopting for these sciences names already in use, though 
with a modified signification, we may style them : 

1. The Science of Value, or pure economics; 

2. Social Economy; and, 

3. National Economy. 

11. Pure Economics. — If we study the industrial life of 
mankind, separate from all consideration of social or national 
conditions and divisions, we shall obtain a science of pure eco- 
nomics, which we shall call the Science of Value, The name is 
not without objection, but the term value, more nearly than any 
other of those sanctioned by use, covers the whole phenomena 
of economic Hfe. The real meaning of this term — value — will 
be shown in another chapter. 

The scope of this science has already been partly shown in 
the preceding chapter. It is the natural history, as it were, of 
work and wealth. It embraces all the phenomena which natu- 
rally arise out of the relation of the three great economic factors, 
want, v^lth, and work. Like all pure sciences, it deals with 
general principles and laws rather than with particular applica- 
tions and phenomena. It is that science of political economy 
which so many modern writers, like Smith and Quesnay, Say 
and Mill, Rossi and Senior, Wayland and Carey, Walker and 
Bowen, have attempted to develop, and which seeks to know 
all the laws that center in the notion of value, and go out from 
it to influence human affairs. 

12. Social Economy. — If now among the facts and princi- 
ples of this science of value we bring in human society, with 
its social forces and necessities, its various social ranks, classes, 
and conditions, its poverty and riches, its learning and igno- 
rance, its masters and servants, its capitalists and laborers, its 
dependent childhood and its sustaining parenthood, its crim~es 
and charities, its homes, churches, and schools, it is clear that 



THE THREE ECONOMIC SCIENCES. 19 

a new set of economic phenomena must arise, and new condi- 
tions and problems appear, unknown to the pure science of 
values. New wants will emerge, new conditions of work will 
arise, and wealth will be found reacting powerfully among the 
social forces, and taking on new functions as a social factor. 
We find ourselves studying a new science, or, rather, an ap- 
plication of the old. This applied science we call vSocial 
Economy. 

The name is not new. Several writers have seen this large 
social side of political economy, and have chosen the name 
social economy as expressing best their view of the general 
science. 

13. National Economy. — Now let mankind be separated 
into different nations. Let the differences of race, of language, 
of territorial position, of climate, industries, and civilization 
come into the field of our pure science of values, and, behold, 
another change has occurred in its limits and phenomena. An- 
other set of facts, forces, and conditions appear, and new ques- 
tions and problems arise. Our great primary factors of wants, 
work, and wealth take new and strange aspects. To personal 
wants of individuals are added wider national wants; the indus- 
tries assume a national character and import; and private wealth 
becomes tributary to national power and purposes. We con- 
front another field of economic science, which we may not un- 
fitly call National Economy. The name is not new, though it 
has not been employed in the Hmited and precise sense here 
given to it. 

14 The three sciences contrasted. — These three eco- 
nomic sciences, though they have many principles in common, 
yet differ in much. As already stated, the first may be called 
the pure science, dealing with fundamental and universal facts, 
and remaining true in all times and places. The other two are 
mixed, or appfied sciences, and vary with each new condition 
of the society or nationality involved. 

The Science of Value concerns itself only with the factors of 



20 POLITICAL ECONOMY. 

want, work, and wealth. It seeks to determine the nature, ori- 
gin, changes, and laws of distribution of values. It wishes to 
know general principles and universal laws. 

Social Economy studies the industries as social phenomena, 
and wealth as a social force. It takes into its account the re- 
lations of work and wealth to the growth and well-being of so- 
ciety and its various classes. It admits to its view a large 
number of social wants. 

Social Economy is properly a chapter of social science. Its 
problems have two sets of factors : the one social, the other 
economic; and the solution of these problems necessarily in- 
volves the principles of both social and economic science. 
The answer of the pure political economist to the questions of 
socialism, are rarely or never satisfactory to the true socialist. 

Among the problems of Social Economy are those of wages, 
of the relations of labor to capital, of population, of pauperism 
and public charities, of education, of the economic aspects of 
intemperance and crime, and of many of the questions of so- 
cialism and communism. Some of these problems belong, also, 
in part, to national economy or to general politics. 

National Economy discusses wealth as a national resource, 
and as an essential condition of national life, power, and well- 
being. It studies the industries as matters of national concern- 
ment, and as connected with national character and progress. 
Its aim is the good of the nation, and it is, therefore, a seg- 
ment of political science. 

Its problems have a political as well as an economic side. It 
accepts the science of value as one of its bases, but it insists on 
the laws of national growth and power as the other. The 
mere economist is often an unwise statesman. His economic 
theories too often neglect or discard the facts and needs of 
nationality. 

The problems of national economy include such as those of 
tariff and foreign trade, of taxation, of bounties and protection 
to industries, of international commerce, currency, of banking 



THE THREE ECONOMIC SCIENCES. 21 

and money, of public education and public improvements, 
highways and water-courses, and of public revenues and public 
lands. Other economic questions sometimes assume a national 
aspect and become questions of national economy. These 
problems are often counted as belonging to the statesman 
rather than to the economist, but statesmanship must look to 
economic science to aid in the solution, if not to give the com- 
plete answer. The statesman has no other means of solving 
them than has the economist. 

15. Importance of the division. — This threefold division 
of economic science is important; and, if made earlier, might 
have saved political economy from much of the confusion seen 
among its writers, and not a little of the reproach thrown upon 
its teachings. It is obvious that questions of social economy, 
or of national economy, can not be properly answered by the 
abstract principles of the science of value alone. As well seek 
to settle a question in mechanics, or in accounts, by the simple 
rules of arithmetic. It is true that the aid of arithmetic must 
be called in before the final answer to the mechanician's prob- 
lem can be had; but there are questions of force, velocity, and 
direction, or of materials and of proper mechanical devices, 
which must be determined before the computations of numbers 
can begin. The most difficult part of the problem must often 
be answered before the aid of arithmetic is invoked. No accu- 
racy in numbers can give a true solution if an error has crept 
into the first part of the work. So the problems of social and 
national economy involve, in their solution, the principles of 
pure economic science; but they involve also principles of 
social and national life, and no correct answer can be obtained 
without taking these into account. As a familiar and conspic- 
uous example, take the question of a protective tariff. Prop- 
erly it is a problem of national economy, and can only be 
solved as such. The various attempts to settle it as a question 
of political economy have filled the world with endless if not 
useless debates. 



2 2 POLITICAL ECONOMY. 

i6. The three sciences mingle. — It may not be neces- 
sary, nor indeed always possible, to treat these three great 
branches of economic science separately ; but it is important to 
recognize distinctly the fields which they occupy, and the 
special conditions and problems belonging to each. The com- 
mon facts of humanity, society, and nationality are interwoven 
in so many threads and figures that it may seem impossible to 
trace their separate influence; but the different visions which 
these names summon before the ^mind prove that each has 
features not common to the others. 

In each, the facts of want, work, and wealth fill a large part 
of the field. Neither society nor nations could exist without 
the support of labor and its products. To promote labor and 
to protect its products are, indeed, among the chief aims and 
duties of society and the state. There are few great social or 
national questions which have not an economic aspect or factor. 
Social and national economy constitute the largest chapters in 
social and political science. That they are also the most ab- 
struse and difficult parts of those sciences does not lessen, but 
rather increases their importance to the patriot statesman. 

17. The division authorized — This classification of po- 
litical economy, though new in the form and importance here 
claimed for it, is not without support in the writings of eminent 
economists. In the wide landscape of industrial fact and move- 
ment, some observers have caught sight of one of these fields, 
and some of another; but the common disposition has been to 
show that the field seen is the entire territory instead of a single 
section of it. 

As in the case of the three great primary elements — want, 
work, and wealth — some economists have taken one, and others 
another, of these fields as the all embracing territory of the 
science. Thus we have had political economy presented by 
some as national economy, by others as social economy, and 
by others still as the science of wealth. And each of these 
has been counted as including the whole science of political 



THE THREE ECONOMIC SCIENCES. 23 

economy. Or, as has, perhaps, more frequently happened, the 
common name of poHtical economy has been retained, while 
some have defined and treated it as the science of wealth, others 
as national, and others still as social economy. 

18. National Economy first. — Among the earUer writers, 
political economy was almost exclusively national economy. 
They were usually statesmen or publicists, and they were led 
to the study by national exigencies, such as the decrease of the 
public revenues, the increase of national expenses, the preva- 
lence of pauperism, or by some national crisis in finance or in- 
dustry. It was the struggle of nations loaded with debt, and 
envious of the prosperity of their richer neighbors, which gave 
impulse to the study of political economy. Labor itself was too 
much despised as the degrading drudgery of the brutish and en- 
slaved mass to excite the attention of great thinkers. Only the 
glittering wealth which came as the sweet fruit of this menial 
toil, and was plucked and enjoyed by nobles and monarchs, was 
considered as worthy the study of statesmen. Colbert, the 
great minister of Louis XIV., studied, it is true, to promote the 
industries of France, because he saw clearly that to increase the 
taxes he must increase the tax-paying power of the people. But 
his master showed how little he comprehended the wise policy 
of his minister by driving out, without scruple, by the revoca- 
tion of the Edict of Nantes, hundreds of thousands of his most 
industrious subjects. 

Adam Smith, who has been accounted by many to be the 
founder of the science, entitled his work, ''Inquiries into the 
Causes of the Wealth of Nations." The German and Italian 
economists have usually preferred the title national economy to 
that of political economy. Professor Wm. Roscher, one of the 
latest and ablest of the German writers, returns to the name po- 
litical economy, but defines it as treating "chiefly of the mate- 
rial interests of nations." In another statement he gives the 
science the broad field here claimed for it. ' ' Like all the po- 
litical sciences or sciences of national life, it is concerned, on 



24 POLITICAL ECONOMY. 

the one hand, with the consideration of the individual man, 
and, on the other, it extends its investigations to the whole of 
human kind." 

The most conspicuous aim of political economy is, doubtless, 
the general wealth and well being; and as these have their most 
conspicuous feature in the national prosperity, it is not strange 
that this aspect of the science should be most noted. And thus 
political economy is thought of as a study for statesmen and 
pubHcists, rather than one for business men and for students of 
social science. 

ig. The science came next. — The desire to find a sci- 
entific basis and form for the study, led to more careful observa- 
tion of the nature and laws of values, and of the forces by 
which values are produced. The discussions shifted from the 
field of national economy to that of the science of values, or of 
wealth, preferred as a more general term for the aggregations 
of values. The name, political economy, still retained by most 
writers, was now defined as the science of wealth, but it was 
still made to cover the questions of national economy, as chap- 
ters of the more general science. 

Adam Smith, of England, Jean Baptiste Say, and his suc- 
cessor Count Pellegrino Rossi, of France, followed by the 
eminent English economists, Ricardo, J. Stuart Mill, N. W. 
Senior, and by a long line of eminent names of European and 
American writers, have given their strength to the development 
of this science of values, though they differ much both as to the 
exact limits of the field it should cover, and as to the meaning 
and import of such words as value and wealth. 

With this recognition of the scientific character of political 
economy came a host of controversies which have injured the 
credit of the study and retarded its progress. These contro- 
versies, though seemingly endless, reduce readily to three main 
questions. 

20. The questions and answers. — i. As to its field: 
Shall political economy embrace simply the laws of values or 



THE THREE ECO NO All C SCIENCES. 25 

wealth, or shall it include also the phenomena and laws of social 
and political life? 

2. As to its nature: Shall it rank among the material and his- 
torical sciences, or among the mental and moral? 

3. As to fact: Is it properly a science at all, or is it merely 
the art of good management, personal, social, and political? 

To quote the opinions of the great authors upon these ques- 
tions would occupy a volume. Let us rather present the simple 
and easy answers afforded by the analysis offered in these two 
chapters. 

1. Political economy, as the pure science of values, studies 
the laws of value as they are presented under the three catego- 
ries of want, work, and wealth.' In its two applied branches of 
national economy and social economy, it covers the laws of 
national and social well-being as far as these depend upon the 
element of wealth. 

Count Rossi recognized this difference between pure and ap- 
phed science in political economy, and relied upon it to recon- 
cile the dispute that had arisen as to the proper scope of the 
science. But he did not sufficiently insist upon it, nor give to 
the two their proper limits. 

2. Pure political economy, or the science of values, is clearly 
a mixed science, taking into its survey the purely mental facts 
of want and desire, and the material facts of work and goods. 
If we must resort to the mental phenomena to explain the mate- 
rial, we must equally resort to the material to explain the 
mental. If the dollar without the desire for it is worthless, and 
therefore not economic, the desire without the dollar, real or 
possible, is powerless and also uneconomic. Both orders of 
facts are essential to the full science. 

3. The question whether political economy is a science, de- 
pends upon the definition given to the word science. As com- 
monly used, the word science may mean: i. The facts in some 
one field of knowledge referred to their proper laws, and ac- 
counted for by those laws; or it may mean: 2. A branch of 

P. E.-3. 



26 POLITICAL ECONOMY. 

knowledge so thoroughly worked out and systematized, the 
sequences of facts so determined, that it is possible to predict 
the result of any given set of facts observed. It is obvious that 
these two meanings differ only in the degree of advancement ob- 
tained by the knowledge in question. Few, if any sciences, 
have attained the standing required by the last definition. All 
knowledge is scientific if it refers its phenomena to the great 
natural laws from which they spring. Political Economy traces 
its facts to the mental and social laws and forces from which 
they spring. Its phenomena are the effects of causes, more or 
less perfectly understood, and are controlled by natural laws as 
fixed and uniform as the laws of physics. They may be more 
difficult to trace and comprehend, but this does not destroy 
their scientific character;, it only shows the science to be harder 
to learn and apply. 

If the question of character lies between considering it as a 
science or an art, the answer is still easier. All arts reach back 
into some science from which they draw their principles; all 
sciences have their arts in which their principles find application. 
All good management, whether personal or national, is based 
upon some theory, more or less distinctly understood; and every 
theory assumes the existence of fixed underlying principles or 
laws. "All political rulers," said Prof. G. K. Richards, of Ox- 
ford, "whether they recognize the fact or not, are, of necessity, 
political economists. On some principles of economy, true or 
false, they must needs act." 

The difficulty of the science and of its applications, is ad- 
mitted without debate; but this difficulty has been vastly in- 
creased by the failure to recognize the distinctions between the 
three great branches of the science insisted on in this chapter. 

21. Rise of Social Economy. — As modern revolutions in 
government and society brought the working people gradually 
into power and honor, the students of economic science began 
to pay more attention to the problems of social science. Pro- 
found questionings arose among the people themselves, as to the 



THE THREE ECONOMIC SCIENCES. 27 

nature of property and the rights of labor and capital. A wide- 
spread unrest manifested itself. Strikes and labor insurrections 
appeared- and organizations spread throughout the working 
world, aiming to introduce great economic and social revolu- 
tions. Political economists felt themselves called upon to exam- 
ine the new problems proposed, and a new science appeared — 
that of Social Economy. 

The present tendency of economic science may be said to be 
in the direction of social economy. It is, however, linked closely 
with national economy. Thus, in our country, the late Henry 
C. Carey and his followers of the Philadelphia School of 
Economists are chiefly social economists, though Prof. R. E. 
Thompson, one of the most recent expounders of its doctrines, 
calls his book "Social Science and National Economy." 

In France, where the questions of social organization have 
engaged most attention, the title. Social Economy {Economic 
Socialc), proposed by Say, has been employed by E. About and 
others. Prof. J. E. Thorold Rogers, of Oxford, has also used 
this title, though both About and Rogers properly limit the term 
to real social economy, and do not extend it to the entire field 
of economic science, as the term national economy has been 
extended. 

22. Other divisions possible. — Thus all the three grand 
divisions of political economy have been recognized by eminent 
economists, though not, perhaps, in the exact limit and relations 
claimed for them in this chapter. It is further evident that if 
this division exists in nature, its recognition is essential in 
our studies. To put together those things which nature puts 
asunder, can produce nothing but confusion and errors. 

It matters litde that our three sciences mingle with each other 
on their borders, and that they have many principles in com- 
mon. This is true through the entire realms of human knowl- 
edge, because it holds through the entire domains of being. 

"All are but parts of one stupendous whole." 



2 8 POLITICAL ECONOMY. 

Physics includes half a dozen sciences, each of which has some- 
thing in common with all the others. Physics, chemistry, biol- 
ogy, and geology, though separate sciences, have large areas of 
common ground. Each borrows principles and truths from the 
others. 

The progress of all true science has resulted in subdivisions of 
its territory. The ground originally assigned to one science has 
been found to include two, or ten even. Economic science is 
certainly no exception, and a full discussion of it may require us 
to still further subdivide its territory. Indeed, a sort of cross- 
sectioning of it has already commenced, and we are furnished 
separate treatises on some of its chief sections, such as Banks 
and Banking, Money and Currency, Labor, Wages, and Land. 
A different subdivision will give us the economy of agriculture, 
of commerce, of manufacture, and of other great departments of 
industry. 

23. Certainty not necessary to usefulness. — Economic 
science shares the uncertainty that attaches to all those in which 
the human will enters as a factor. This factor takes it out of 
the rank of the mathematical and exact sciences, but by no 
means discredits its utility or its claim to be treated as a 
science. 

As in the case of meteorology, geology, and many other 
sciences of cosmic or cosmopolitan forces, its field of observation 
is too wide, and its phenomena are too comphcated for the pres- 
ent powers of man; but this is a confession of its difficulties 
rather than a proper charge against its scientific character. 

The popular objection to political economy, that it fails to 
furnish infallible rules for the guidance of business men and 
statesmen, is no more just than would be the same objection 
urged against the boasted common sense which serves mankind 
so much, but which can furnish no infallible rules for the direc- 
tion of its possessor or of others. The common sense is noth- 
ing but unwritten science, and science is only the common sense 
of truth and fact reduced to writing. The master of common 



THE THREE ECONOMIC SCIENCES. 29 

sense may, sometimes, understand the facts more clearly and 
profoundly than the scientific writer, and in this case the com- 
mon sense view, so called, will be better and truer than the 
written science, because more truly scientific. 

If common sense is useful, it is useful through its clear per- 
ceptions of the facts and truths in question, and the more clear 
and complete this perception, the better and more useful the 
common sense. But it is folly to contend that the unwritten 
perceptions and judgments of the common sense are useful for 
the guidance of statesmen and business men, while the same 
judgments and perceptions, carefully classified and plainly 
written, are useless. If economic science and the plain common 
sense of experienced practical men do not agree, as far as they 
cover common ground, it is because one of them is false. And 
the false one is not science, for all true science is true. 

We affirm that economic science, like meteorology or any 
of the incomplete sciences — hke common sense — is useful as far 
as it is known and established. It has already modified and 
improved theories of government, and has changed the features 
of the social and industrial life of the world. To no other 
science can mankind look for future guidance in the great 
struggles for economic progress and amelioration. 



CHAPTER III. 



THE TRIANGLE OF VALUE. 



24. The natural history of value. — We approach now 
the science of value, or of the industries which produce value. 
It is the science of human want, work, and wealth. But these 
three every-where group themselves around a central fact, which 
may be symbolized by a triangle — the triangle of value. 

The world is full of work. Every-where appear the toil and 
struggle of millions — toil of hands, of brains, and of helping 
machinery. This is the perpetual and most conspicuous fact in 
the daily life of humanity. Now for what is all this toil? 
Plainly to produce the objects which may satisfy human wants — 
objects which can support life, gratify desire, and give pleasure, 
or prevent or lessen pain. 

This toil has been abundantly successful. It has produced 
more of these objects than are needed to satisfy the present 
wants of mankind. Gradually have accumulated great stores of 
such objects — of foods, cloths, tools, machinery, houses, culti- 
vated fields, domestic animals, and innumerable things of use or 
beauty. 

But these great accumulations do not exist as a common 
stock. They belong to owners — to those who made, or bought, 
or inherited them. Why they so belong is a question for an- 
other chapter. The belonging is a fact; and only the owners 
have the right to use and enjoy them. 

But now the toil and struggle still go on. Notwithstanding 

the accumulations, the toilers still labor to produce useful ob- 

(30) 



THE TRIANGLE OF VALUE. 31 

jects, though it is with a partly changed purpose. They toil to 
produce something which they may exchange for some part of 
the accumulated goods. 

This is the simplest history of those objects which men call 
goods^ because they benefit or do us good ; conwiodities , because 
commodious, or helpful to man's needs; products, because 
brought forth from antecedent wealth, or work; property, be- 
cause they belong to owners; merchandise, because men sell 
them. 

Thus, toil which started with the purpose of gratifying a de- 
sire, comes finally to seek, as one of its chief aims, the means 
of buying the goods already existing. Accumulation is a 
stronger motive than present gratification, for accumulation has 
the promise of all future gratifications in it. 

25. Three requisites of value. — But what kinds of ob- 
jects must men offer for the purchase of goods? First, some- 
thing useful; for surely no sane man will give a good and useful 
thing for one that is neither good nor useful. 

Second, it must be something which can not be produced or 
procured without labor or difficulty; for men will not give that 
which has cost labor for something which they can get without 
toil or trouble. 

Thirdly, it must be something that can be owned or pos- 
sessed; for one will not give that which he owns for a thing 
which he can neither own nor sell. 

If any one of these qualities be lacking, the object will not 
sell. If all are present, the object is said to have value. Men 
desire it, and will give other goods for it. Such is the plainest 
and simplest account of value. Every child that runs an errand 
for a penny unconsciously recognizes value. It is in the 
thought of every day-laborer. It makes a part of every 
bargain, whether for a mouse-trap or a gold mine. 

But value which is thus central in all trade and business, is 
also central in all that science which attempts to explain trade 
and business. 




32 POLITICAL ECONOMY. 

We seek first this central fact or entity — this triangle of 
value — whose three sides confront and unite the three great facts 
and factors of the industrial, business world. The key to our 
science must be found in that. / 

26. The sides of the triangle,— Value is made up of 
three essential notions or elements: 

1. Utility, or the power to gratify 
desire — to give pleasure or avoid 
pain. 

2. Effort, or labor required in pro- 
curing or producing the article valued. 

3. Ownership or appropriation. 
These three constitute the sides of 

a triangle, in which each side is es- 
sential, and neither can be removed 
without destroying the triangle. All value is thus threefold or 
three-sided, "^-x 

The discussion of this triangle will prove not only the essen- 
tial character of the three elements of value, but also their 
central relation to the great facts of the industrial world. 

The question whether value is a quaHty of objects, or a 
simple conception of the mind — a question so learnedly and so 
laboriously discussed by eminent economists — is of Httle prac- 
tical importance. The simple truth, as the business world con- 
ceives and acts upon it, is this : Value is a complex fact made 
up of three elements, one of which, utility, is conceived as 
residing in objects, and the other two, effort and ownership, 
are thought of as material or external relations. These latter 
do not appeal to the senses as facts of form, color, or weight, 
and they are, therefore, necessarily mental concepts; but they 
are always conceived as attaching to matter. 

The complex nature of value, once fairly recognized, will end 
much of the debate which has arisen from the attempt to define 
it as a simple notion or fact. 

27. Utility described. — Utihty, the first side of our tri- 



THE TRIANGLE OF VALUE. 33 

angle, is the first quality thought of in the production of values. 
It is generally, also, the first considered in trade. Of what use 
is it? What is it good for? How much of good is there in it? 
These are the first questions asked or thought of in ascertaining 
both the fact of value and its amount. If the object lacks all 
power to satisfy, directly or indirectly, any human want, desire, 
or taste, its value is at once, and with certainty, denied. It 
may have cost immense labors, like the deserted fortifications 
of some old battle-field, but if it is now without -use, if no one 
desires it for any purpose whatever, it is without value. 

Utility must here be taken in its broadest sense. It includes 
not only the power to satisfy want, to give pleasure, to procure 
a good or ward off an evil, but to serve any purpose of man, 
society, or the state, in the present or coming time. Utility 
must often pass through several steps before it reaches a human 
desire. A fertilizer is useful to enric.h a meadow; the meadow 
is useful to produce hay; hay is useful to feed horses; and 
horses are useful to do service, or to afford power for further 
production. From the fertilizer to the man are several steps; 
but it is the final step which makes all the others count. It is 
the human want or desire which lends value to them all. 

Some economists have chosen to employ the word service as 
a broader term than that of use, and as including both the use- 
fulness of goods and of persons. But this breaks down an im- 
portant distinction, and twists the word service out of its plain- 
est meaning. 

Utility makes up so large a part of value that the two words 
are used in common speech as synonymous. Men talk of the 
value of fresh air, meaning simply its usefulness. But they are 
themselves conscious of the different sense in which they use 
the word when they speak of the value of a gold watch. Let 
them be asked what is the value of pure air, and they will tell 
what it is good for; but ask them the value of the watch, 
and they will reply, a hundred dollars. In the one case, value 
is used for utility, and in the other it means the real cost or 



34 POLITICAL ECONOMY, 

price. In business and in political economy it always means 
the worth, including utility and cost. 

Adam Smith and other economists have tried to rid their dis- 
cussions of the ambiguity growing out of this double use of the 
word value, by discriminating between "value in use" and 
"value in exchange." Chapters have been written to show 
that the former is simple utility, and is not the same as the 
other. The device of substituting a phrase for the word is 
awkward in form, if not also incorrect in fact. "Value in use" 
can only mean useful in use, a tautology which comes near be- 
ing an absurdity. 

It is better to reclaim the word at once to the only meaning 
it can have in economic science, as covering the complex idea 
presented in our triangle. If the student, . after a simple ex- 
planation, can not thereafter distinguish between utility and 
value, he should be sent back to begin his education. 

But while value differs from utility, let it be carefully noted 
that it does not exclude it. There is no value without utility. 
Value is utility and something more. 

Water has high utility, but not, commonly, any value. Let 
it become scarce, and so require labor to obtain it, and the 
owners of water find it valuable, and get a price for it. 

28. Effort defined. — Effort, the second side in our triangle, 
and the second element in value, includes all labor of mind or 
body — all exertion of strength or skill needed to procure or 
produce the object of value. 

How effort enters into value is easily shown. What can be 
had for the taking, and without effort, men will not buy. Such 
objects cost nothing and carry no price. Sunlight is vastly 
better than gas light, but no man offers sunlight for sale, or 
thinks of it as a commodity. It comes without effort, and is 
enjoyed without cost. Whatever has cost effort to procure, or 
would cost effort to replace, the owner will not part with, ex- 
cept for an equivalent. 

All effort is more or less painful or exhausting, and men will 



THE TRIANGLE OF VALUE. 35 

not undertake efforts without compensation. The pain or 
trouble of the effort is weighed against the gratification to be 
gained by it. 

All value represents effort or labor. In general, all value is 
produced by labor. In some cases the utility is the result of 
the labor, and in others it is the product of nature, and col- 
lected by labor. The utility of a watch is given it by the labor 
bestowed upon it; the utihty of an apple is its natural quality. 
In each case the value is due to the labor, or, in other words, 
the labor must be added to the utility in making up the value. 
If the first question to be asked concerns the utility of an ob- 
ject, the second as certainly concerns the effort necessary to 
obtain it. 

In the place of effort, J. Stuart Mill and others have chosen to 
consider the "difficulty of attainment" as the true element in 
value. Properly, neither of them reside in the object, but both 
stand related to it. The difficulty of attainment represents the 
obstacles to be overcome; the effort represents the pain or 
trouble of overcoming them. The one involves the other. The 
efforts must equal the difficulties. Each in turn will naturally 
be in mind, in thinking of value. In estimating the value of a 
fish, or of a rare work of art, the difficulty of attainment may be 
first thought of; but in valuing manufactured goods, or ordinary 
commodities, the effort required in their production is uppermost 
in mind. It seems clear that most commonly, if not also most 
naturally, the efforts are counted as the element of value. 

N. W. Senior, an eminent English economist, regarded 
scarcity as an element of value. But scarcity is only one of the 
forms of difficulty of attainment. Gold in the mine is difficult 
to obtain, because of the rocks to be removed; but diamonds, in 
the sands of Golconda, are difficult of attainment because of 
their scarcity. Whatever increases the effort necessary to gain 
any useful or desirable object will add to its value, whether it be 
obstacles or scarcity. 

It is obvious that the efforts to be taken into account in 



36 POLITICAL ECONOMY. 

estimating value, are not those which were actually expended 
in producing the object, but those which would now be nec- 
essary to produce or replace it. In the oft-used and well-worn 
illustration of the man who found a diamond in his path, the 
jewel was priced not according to the effort which it cost him 
to pick it up, but according to the effort which it would, on the 
average, cost him or others to find another like it. This aver- 
age effort required is supposed to be indicated by the price put 
upon diamonds by those who work the diamond mines as a 
business. 

The effort expended by the producer saves effort to the pur- 
chaser. The producer may still think of his own effort in count- 
ing value; but the purchaser will naturally think only of effort 
saved. 

Both parties will, in fact, compare his own efforts saved and 
expended. The producer or seller compares the effort it cost 
him to produce or procure the goods, or that which it will cost 
to reproduce or replace them, with the effort it would cost to 
produce or procure the goods or money offered in exchange. 
The purchaser compares, likewise, the efforts required on his 
side to produce the goods, and those which the means of 
purchase have cost or will cost. 

29. Ownership defined. — The two elements, utility and 
effort, may seem at first to be the only essential ones. They 
have been treated as such by De Quincey, Mill, and others. 
But a little observation, or a fresh appeal to the business world, 
will reveal another. 

In actual life, ownership is always thought of as a part of 
value, or, at least, as one of its essential adjuncts. No one will 
purchase what he can not own. The word property, in the 
sense of something owned or appropriated, is used as a common 
name — the commonest, perhaps — for all objects of value. The 
very notion of all purchase is that of gaining rightful possession 
or ownership. Honest men will not, knowingly, buy stolen 
goods, because a thief can not give good and lawful ownership. 



THE TRIANGLE OF VALUE. 37 

Nearly all economists have recognized and affirmed that value 
can not attach to that which can not be appropriated. They 
account for the absence of value in air and sunshine by the pal- 
pable fact that these things can not be appropriated or made 
property. No ownership in them can be established or con- 
veyed. President Sturtevant makes ownership not only an ele- 
ment of value, but the fundamental law of economic science. 
Roscher says (''Principles of Political Economy," Vol. i, page 
62), "Goods, to obtain value in exchange, must, in addition to 
their value in use, have the capacity of becoming the exclusive 
property of some one individual." The clear-thinking President 
Wayland said, many years ago, "Another element which enters 
into the notion of wealth is the idea of possession." 

The notion of ownership is the basis of all transferability in 
values. Utility and effort can not be conveyed as property 
without this. They may be abandoned, but they can not be 
transferred either as a purchase or gift without recognizing own- 
ership. Only he who owns them can rightfully sell or give 
them. 

This third element of value, though so long almost unrecog- 
nized by leading economists, has come to hold the chief place in 
the world of trade and in the esteem of men. The severer 
pressure of present want having been relieved, utiHty is now 
thought of chiefly as a means of appeal to the cupidity of others. 
Large masses of values, or property, being in existence, the 
efforts which they cost are partly forgotten. But ownership re- 
mains a present fact, full of power and rich significance — full, 
also, of all promises of future good. To gain this ownership 
becomes naturally the leading aim of industry and enterprise. 
Men work to increase their possessions. They struggle for a 
larger share of what is called the world's wealth. After meet- 
ing and providing for the day's needs, all efforts and products 
go to purchase permanent possessions. 

The ownership of wealth gives so much of power and dig- 
nity — so many advantages in the struggle for honor and influ- 



38 POLITICAL ECONOMY. 

ence — that ownership is sought for its own sake, even when the 
wealth itself is unneeded if not a burden. 

30. The three elements essential. — These three ele- 
ments, though different in their nature, are all equally essential 
to the full notion of value as it exists in the industrial world, and 
as it enters into political economy. Strike out either side of the 
triangle and the triangle is destroyed. In any object of value, 
obliterate either its utility, its demand for effort in its produc- 
tion, or its property relation to some owner, and in either case 
the value will disappear. It will no longer have a price, nor be 
salable. Men may still desire it for its usefulness as they de- 
sire fresh air ; they may appreciate the labor it has cost, as they 
appreciate the well-worked highway ; they may even recognize 
the right of property as that of a man to a letter he has written 
or to some short-hand notes he has made for his own advantage, 
and which are wholly illegible and useless to any one else ; but 
till these three qualities unite in one object, there is no mer- 
chantable value. 

These three are the only essential elements in value, since, if 
these are all present, value is present in all its power and func- 
tion. 

In general trade, values are based not upon the desires or 
efforts of the actual owner or purchaser, but upon the presump- 
tion of general desires which are assumed to exist, and upon an 
average effort which it is assumed will be required to obtain the 
article. Thus the price of flour depends upon the assumption 
of the general hunger which it will feed, and upon the effort 
which in general will be required to obtain it in the given time 
and place. It thus happens that goods often bear a fictitious or 
exaggerated value. But false values presuppose the true, just as 
counterfeit bank notes presuppose true ones. 

31. The three elements compared. — Utility, efforts, 
and ownership, here called elements, are not elements in the 
strict sense of the term; they are rather parts of a complex 
whole, not elements of a compound. A comparison of them 



THE TRIANGLE OF VALUE. 39 

in some prominent aspects will best show their true character 
and relation. 

1. Looking at the object valued: 

Utility inheres in it as some form, quality, or other fitness to 
meet desire. Effort represents the force necessary to produce 
this form, quaHty, or fitness. Ownership represents the right to 
use or enjoy the object — its restriction to some one owner. 

2. Looking at its relations to other objects : 

Utility is the relation of the object to the powers and needs 
of man. Effort shows the resistance offered by other things to 
the enjoyment of the object desired. Ownership tells the ex- 
clusion of the object from the common stock of nature's gifts. 

3. Looking at man and nature: 

Utility in an object measures nature's power in it over 
man — man's dependence upon nature. Effort measures man's 
power over nature — the extent of his power to subdue nature 
to his use. Ownership bespeaks man's power over man — his 
enforcement of his right to enjoy his own efforts. 

4. Utility has been described as affirmative or positive value; 
effort, or the difficulty of attainment, as negative value. The 
first represents the positive power of gratification residing in 
the article ; the second, not something in the article, but the re- 
sistance to be overcome before its utility can be reached. 

5. Utility is a good sought. Effort is the rugged path which 
leads to it. Ownership is a right to hold and use it. 

6. Utility appeals to desire ; effort, to fear or dread of effort ; 
ownership, to the sense of power. 

7. Utility resides in the object; ownership, in the man; effort, 
in both. 

/32. The triangle inscribed. — Looking at the entire field 
of economic science as included in the three great facts of 
want, work, and wealth, each element in value is found to 
front one of these fundamental facts. Our triangle may, there- 
fore, be inscribed in the economic circle as follows : 

Every object of value exhibits- this threefold response to the 




40 POLITICAL ECONOMY. 

great facts of the business world. Its utility faces human wants. 
Its required effort faces the working world. Its principle of 

ownership ties it to the world of 
wealth. Whatever the object, 
whether a material thing or some 
power of service, these truths 
hold good. Value is forever, 
and in all cases, thus three-sided 
and central, in the economic 
world, and in the science which 
exi^lains this world. 

And since every business trans- 
action — every act of labor or of 
trade — involves some value, every such transaction must exhibit 
these three sides and this threefold relationship.\ 

J. Stuart Mill denies this central relationship of value to the 
entire science of political economy, and offers in proof of his 
view that he has proceeded through two main divisions of his 
work — books I and II — without discussing value. But his 
proof is spoilt by the admission which follows : " It is true that 
in the preceding books we have not escaped the necessity of 
anticipating some small portion of the theory of value." (''Po- 
litical Economy," book III, chapter I.) We may add that 
Mill's treatise throughout recognizes the idea of value as pres- 
ent to the mind of writer and reader, and its meaning is 
assumed as understood without discussion. His poHtical econ- 
omy, if stripped of this ever-present idea, and the propositions 
involving it, would show remaining only some disconnected, if 
not incoherent, thoughts on political and social science. 

De Quincey, with more acuteness and correctness, affirms the 
notion of value to be "not a regulative but a constitutive idea 
of political economy." ("Logic of Political Economy," sec. i.) 
Frederick Bastiat says: "The theory of value is to politi- 
cal economy what numeration is to arithmetic." ("Harmonic 
d'Economie Politique.") Scores of writers might be quoted in 



THE TRIANGLE OF VALUE. 41 

proof of our position ; but an easy appeal to the common sense 
of the business world would show that all the activities of in- 
dustrial life circle around this idea of value. Let it disappear, 
and all the industries would cease, and economic science would 
no longer exist. 

33. Erroneous notions of value. — It is necessary to no- 
tice some of the common errors in the definition of value in 
order that economic science may be freed from the charges of 
speculation and obscurity which have been urged against it. A 
brief exhibit of these errors will also be of use to the student as 
showing the difficulties to be met, and the mistakes to be 
avoided in his progress. 

Value is complex. The common source of error has been 
the disposition to regard it as simple, and to define it as such. 
Being expressed by a single word, the tendency is to believe it 
a simple idea. 

The definitions given, though numerous and discordant, may 
be reduced to the three following classes : 

1. Value is defined as some power or property, inherent or 
acquired, residing in the object valued. 

2. Value is a relation between the objects valued. 

3. Value is a mere feeling or judgment of the mind, directed 
toward the object valued. 

34. Exchangeability mistaken for value. — To the first 
class belongs the definition given by several economists : that 
value is purchasing power or exchangeability; in other words, 
the power to induce exchange and thus to procure another val- 
uable object in place of the one given. But common sense 
tells us that it is because value is discerned in each of the ob- 
jects offered in exchange that the exchange is made. One 
might as well define music as the power to induce listening. 
Purchasing power is the incident or result of value; not value 
itself. Every value is desirable, and therefore exchangeable. 
To define value as purchasing power, is only to give it a new 

and imperfect name, which needs definition as much as the first. 
p. E.— 4. 



42 POLITICAL ECONOMY. 

Value has, indeed, the power to purchase or procure another 
value in exchange, simply because it is value — something which 
men want and will give value for. And as exchange occupies 
so large a place in the business of life, the purchasing power 
of value is its most conspicuous and most frequently used 
function. 

35. Value not a relation. — Under the second class of 
erroneous definitions comes the famous definition of Bastiat, 
pronounced, by " McLeod's Dictionary of Political Economy," 
to have effected " the greatest revolution that has been effected 
in any science since the days of Galileo." This definition 
declares that "value is the relation of two services exchanged." 
In another statement of it, Bastiat says: "Value consists in 
the comparative appreciation of reciprocal services." Several 
American authors have followed Bastiat in defining value as a 
relation between things exchanged, or offered in exchange. 
Since a relation can only exist, or at least be known, when 
both terms related are present in thought, it follows that value, 
if merely a relation, can not attach to a single object; nor, in- 
deed, to any number of objects except when compared. But it 
is evident that value is thought of by all as belonging to each 
of the objects or services offered for exchange. The very de- 
sire for exchange springs from the belief in the existence of two 
values, and the only question in exchange is as to the equality 
of these values. 

The error seems to lie in mistaking the measurement of value 
for value itself. Ask any man if his hat or coat has any value, 
and he will reply, promptly, yes. Ask him how much value, 
and he will, perhaps, say, " I do not know; I have not fixed a 
price;" or, in other words, measured the value. But measur- 
ing value does not produce value any more than measuring 
wheat produces wheat. A relation of quantity exists, doubdess, 
between two values, as it exists between any other two objects 
or forces open to the same measurement. 

36. Value not merely a feeling or judgment. — In the 



THE TRIANGLE OF VALUE. 43 

third class come such definitions as that given by the Russian 
economist, H. Storch: "Value is not a quality inherent in 
things ; it depends upon our judgment. We judge that an arti- 
cle is more or less fitted for the purpose for which we desire to 
use it, and this estimation of it constitutes its value." Nearly 
equivalent to this is the description recently given by Bonamy 
Price, of England, who affirms that value is an affection of the 
mind. Plain men will say that the judgment or feeling of value 
imphes the existence of value \ just as the perception or feeling 
of weight or color implies the existence of weight and color. 

It is true that a great variety of considerations and feelings 
often enter into our estimation of a value gotten or given in ex- 
change; and a still greater variety induces the exchange itself. 
The pressure of an immediate want; the pride, pleasure, or 
passion of the hour; motives of benevolence, of honor, of piety, 
of love, or hate, may cloud or color the view, and cause a 
temporary misapprehension, or disregard even, of the real ele- 
ments of value. But so may passion or prejudice cause a mis- 
apprehension or disregard of any other fact or truth. In many 
cases the parties concerned are conscious of their disregard of 
the true value; and they affirm that the transaction was not 
purely "business" — it was moral or social, not economic in 
character. 

H. C. Carey's definition of value, as "the measure of resist- 
ance to be overcome in obtaining the commodities required for 
our purposes;" N. W. Senior's notion of it as consisting in or 
measured by scarcity; and Prof. Jevons's view, that it is "the 
ratio between two numbers," — all are definitions of the measure 
of value rather than of value itself. 

37. The three elements acknowledged. — Besides the 
three classes of definitions described as arising from the effort 
to define value as a simple notion, there are many others in 
which the presence of two elements or factors is recognized or 
affirmed. 

President Wayland enumerated "the capacity to gratify de- 



44 POLITICAL ECONOMY. 

sire" and "possession" as elements of value. J. Stuart Mill 
wrote "that a thing may have any value in exchange, two con- 
ditions are necessary. . . . The thing must not only have 
some utility, there must also be some difficulty of attainment." 
Professor Bowen and President Bascom, both following Mill, 
affirm value to consist of the two elements, ' ' utihty and diffi- 
culty of attainment." 

De Quincey says: "Almost all writers have agreed substanti- 
ally, and have rightly agreed, in founding exchange value upon 
two elements — power in the article valued to meet some natural 
desire, or some casual purpose of man, in the first place, and, 
in the second place, upon difficulty of attainment. These two 
elements must meet, must come into combination, before any 
value in exchange can be estabUshed." 

Roscher writes ("Principle of Political Economy," 1878): 
"Goods, to obtain value in exchange, must, in addition to 
their value in use, have the capacity of becoming the exclu- 
sive property of some one individualj and therefore of being 
ahenated or transferred." In this enumeration of elements, he 
agrees with Dr. Wayland, but disagrees with Mills and the 
others. Roscher elsewhere (sec. v) says: "The value in ex- 
change of goods is based on a combination of their value in 
use with their cost-value." He thus, though not in immediate 
connection, recognizes all three of the elements represented in 
our triangle. 

The affirmation of De Quincey, that "almost all writers have 
agreed substiantially in founding" value upon utility and diffi- 
culty of attainment, has this much of truth in it, that in many 
of the definitions or discussions, both of these elements are in- 
volved or implied; but there are many definitions which can 
not be so construed. 

The many disagreements shown between the writers quoted 
would be increased by a wider quotation. These disagreements 
are easily accounted for by the evident preoccupation of the 
mind with false conceptions of the nature and field of the 



THE TRIANGLE OF VALUE. 45 

science, and of its central and constructive idea, value. Their 
errors in these respects would be of less consequence, but for 
the fact that they affect, with their own viciousness, all the 
discussions based upon them. 

This enumeration of errors will not be useless if it warns the 
reader to be constantly on guard to prevent his mind from slid- 
ing back insensibly into the error of confounding value with 
utility. Pages of useless debate might have been spared us in 
the writings of economists if this unconscious relapse into a 
false view had been avoided. 

38. Synonyms of value. — There are several terms in con- 
stant use in connection with value, and often supposed to be 
synonymous with it. Their definition may properly come here. 

Wealth, as used by economists, means any or all articles hav- 
ing value. In common speech it usually implies an abundance 
of such articles, or of property. The word is sometimes ap- 
plied to the abundance of utility even where no true value 
exists. This has already been noticed. 

Cost means, properly, the amount of labor and value ex- 
pended in the production of any object of value at the time 
and place of valuation. In this sense, the value produced 
should equal the cost. Frequently, however, the word is ap- 
plied to designate the money or other property paid for the' 
object — the purchase money. 

Price is value measured in money — the money equivalent. 
Commonly, the price means the amount demanded for any arti- 
cle. The term price has been so loosely used that it has been 
found necessary to define its different applications as so many 
kinds or forms of price. Thus we have cost price, by which is 
meant cost simply as defined above ; market price, or the price 
asked in market; selling price, or the amount the article is 
actually sold for, and which, in cases of fraud or ignorance, 
may be greatly above or below its real value. 



CHAPTER IV 



HOW VALUES VARY. 



39. A true theory of value explains variations. — The 

incessant variations of value are the perpetual problem of trade 
and industry. They bring riches or ruin to thousands. They 
constitute, in political economy, that element of uncertainty 
which robs the science of half its credit and usefulness. If the 
economist could give rules to forecast the market for any com- 
modity, he might have the ear of the world. 

No theory or definition of value is true or complete which 
does not explain its variations. This explanation, though sci- 
entifically correct, may not, it is true, give the desired power 
of forecast; but it will show the basis on which any true fore- 
cast must be made. A rule may be right in principle, but it 
may fail in application for lack of the facts required. The 
rule for finding the area of a triangle — ''multiply the base 
by one-half the altitude" — is correct beyond question; but if 
either the base or altitude is unknown, the rule can not be 
applied. 

40. Variations of value not al^vays variations of 
price. — The variations of value must not be confounded with 
the variations of price. As price is, in general, value meas- 
ured in money or some other commodity — or value expressed 
in the terms of money — the variation in price may be usually 
taken as indicating a variation in value. But prices are often 
speculative in character, anticipatory of future values, or im- 
posed by monopoly with little regard to values, 

(46) 



HOW VALUES VARY. 



47 



No fact is more open and common in the business world 
than tKfe fanciful fluctuations of prices, seemingly independent 
of real value. The same article may bear one price to-day and 
another to-morrow, influenced only by the whims of buyers or 
sellers, or by statements wholly false and illusory, of probable 
demands or supplies in market. But in all cases there is a pre- 
tense of value, and a virtual recognition of the fact that real 
values do exist and that price should conform to these values. 
The variations of prices may be taken as proofs that there are 
real variations in value; since if value was known to be always 
fixed and invariable, prices themselves must cease to vary. 

41. Variations in utility. — Every true variation in value 
must arise from a variation in some one of the elements of 
value. In determining the changes or variations to which 
these elements are separately liable, we shall determine the 
true causes of all genuine changes in values themselves. 

Utility, which has been already defined as the power to grat- 
ify desire, is subject to two classes of variations. First, the de- 
sire remaining constant, the power of the object to yield grati- 
fication may be increased or diminished, as by growth or waste. 
Old wines gain in value, but old clothes lose. Second, the ob- 
ject remaining unchanged, the desire to be gratified by it may 
change. A bonnet made last year may retain its covering and 
adorning power, but the fashion has changed, and, the desire 
for the bonnet in question being lessened, its value is dimin- 
ished. The changes of fashion occasion some of the most fre- 
quent fluctuations in market values, and these changes are 
purely changes in desires or tastes. 

The discovery of a new use for any article or material, gives 
it a new value by relating it to a new set of desires. So, too, 
the discovery of some new and better means of gratifying a 
common desire, lessens the value of the old means of gratifica- 
tion by removing the desire for it. Thus, linen rags were 
almost without value till it was found they could be manufact- 
ured into paper; and the discovery of petroleum, and the illu- 



48 POLITICAL ECONOMY. 

minating oils distilled from it, greatly diminished the demand 
for whale-oil, and cheapened its price. 

42. Conflict of desires. — But the fluctuations in value, oc- 
casioned by changes in desires, are increased by the opposi- 
tion of the several desires which enter into the common esti- 
mates of value. In exchange, each article offered for exchange 
appeals to a separate desire, and the strength of one desire may 
lessen the force of the opposing desire. The strong desire or 
need for money often leads men to sacrifice, or sell at a 
cheaper rate, the articles they have to exchange for money. 
The strength of a man's desire for a watch may lessen his feel- 
ing of need for a new coat when he can have but one of the 
two. 

But, further, each party in an exchange has two desires — the 
desire for his own property and the desire for that of the other. 
Hence, in every estimation of value, four desires, two of each 
party, come into competition and help to determine the final 
judgment; 

In general trade, the desires of the individual buyers and 
sellers have little to do in determining values. These individ- 
ual desires may favor or hinder the sale of a single article; but 
both parties look to the larger public or general demand and 
supply to fix the real value. The individual buyer is only one 
of many hundreds whose wants are to be supplied; and if he 
demurs to the price fixed, the goods may be kept for other 
purchasers, whose desires are stronger or whose means are 
greater. 

43. Variations of efforts. — Effort is also a variable ele- 
ment. The efforts required for the production of any commod- 
ity change, and this change will cause a variation in the value 
of that commodity. Books, when formerly made by hand, cost 
sometimes as much as a farm ; but the invention of the printing- 
press reduced the value to less than that of a day's labor. 

Three classes of change may affect the efforts of production: 
change in the processes; change in the material used; and 



HOW VALUES VA/^V. 49 

change in the machinery. Processes of production are often 
simplified and improved, so that much larger products come 
from the same amount of labor. In mining, agriculture, and 
the chemic manufactures, many cases abound, in which a 
change in processes both increases and improves the goods 
produced. 

The cheapening of materials by the opening of new sources 
of supply, near market, or the discovery of other and cheaper 
materials, diminishes the effort required in this direction, and 
lessens the market value of the goods produced. The more 
fruitful seasons often produce the same effect, by giving larger 
harvests from the same cultivation. 

The improvement of machinery has wrought the chief changes 
in the amount and kind of efforts required for the production 
of goods. Modern arts are full of examples of lessened labor 
and lowered values. The cloth manufacture, and, more re- 
cently, the watch manufacture, are familiar and fine examples. 
Cloth and watches are now produced by machinery which even 
children, in many cases, can tend; and the value of these prod- 
ucts has cheapened, while their utility and excellence have 
greatly increased. Thousands of men now wear broadcloths 
and carry watches, where only single individuals enjoyed them 
in the old days of hand labor. Aided by his machinery, one 
man can now do the work of ten, and, not unfrequently, of a 
hundred hand laborers. 

44. Variations of value illustrated. — By recurring again 
to our triangle, we may find an illustration which will make 
clearer the relative influence of utility and efforts in producing 
variations of values. 

Let the base, representing ownership, be an unvarying line 
representing a fixed quantity. Then: 

Case I. — It is evident that any increase of either, or both, 
of the lines representing effort and utility or desire, will increase 
the area representing value. This may be seen in the case of 
commodides, such as personal ornaments or other goods not 

P. E.-5. 



so 



POLITICAL ECONOMY. 




indispensable, in which the effort of 
production, and the utility or the 
desire on which the utility depends, 
are limited quantities. Let both the 
work required and the desire for the 
commodity increase, and the value 
will enhance rapidly. 

Case 2. — But the effort remaining 

constant, there is a point which may 

be reached where any increase of 

utiHty will not increase the value area. This will be the 

case when efforts have reached the highest point attainable — 

that is, when the purchasing 
power has reached its highest 
limit, shown by the effort line 
reaching the perpendicular (Fig. 
2). The illustration will remain 
true whether the effort line rep- 
resents the highest possible effort 
or means of purchaser, or only 
the highest actual limit of nec- 
essary labor in production. If an article can be produced by 
a day's labor, it can not, ordinarily, be made to bear a higher 
value by finding a new use for it; nor can its selling price be 
effectively raised above the purchaser's means of purchase. 

Case 3. — So on the other hand, the desire and consequent 
utility remaining constant, there is a point (represented by the 

perpendicular utiHty Hne, Fig. 3) 
beyond which no increase of the 
line of effort can increase the 
value area. It must be remem- 
bered, in this and the other illus- 
trations, that the Hrait of desire 
is also the limit of utiHty. There 
can be no utility where there is 





HOW VALUES VARY. 



51 



no desire to be gratified. If a man's desire for any article is 
measured by one dollar, doubling the effort necessary to its 
production will not increase his desire nor the price which 
measures his estimate of the value, and which he is willing to 
pay. 

But there are cases in which either desire or effort are unlim- 
ited, in which the desire or need is vital, and therefore practi- 
cally infinite; or in which the difficulty of attainment and the 
effort required approaches the infinite — that is, the impossible. 

Case 4. — Let the utiHty be un- 
limited. In this case the value 
area will seem to vary solely 
with the effort required. Doub- 
ling the effort doubles the value. 
In a famine, the price of food 
goes up till at last a man will 
give all he has for a loaf of 
bread. So, too, the value of 
gold sinks to nothing when 
weighed against the plank needed 
to escape from a burning ship. 

Case 5. — Let the effort required be unlimited. Now the 
value area will vary with the utility line. Doubling the desire 
will double the value. This case will explain De Quincey's 
story of the musical snuff-box. The trader, exaggerating the 
charms of the toy, stimulated the 
emigrant's desire for it, and, as 
long as the power to purchase 
was not overpassed, he continued 
to increase the estimate of value. 
In common life, an expert sales- 
man often thus plays upon the 
desires of his customer. 

In the case of a master-piece 
of Raphael or Rubens, the pro- 




Fig. 4. 




52 POLITICAL ECONOMY. 

duction has ceased, and the difficulty of attainment approaches 
the impossible; hence, the price or estimate of value mounts 
with the taste or desire of the buyer. 

45. Monopoly. — Ownership is a right, and can not, there- 
fore, be thought of as varying in quantity. Hence, it can not 
be counted as a variable element in value. But it is, neverthe- 
less, the source of the most frequent and largest fluctuations in 
prices, if not in values, known in the markets. 

Monopoly means, properly, an exclusive power of sale. 
When the ownership or control of all the goods or services of a 
given kind, in any locality or market, belongs to one man, he is 
said to have the monopoly, or exclusive sale, of such goods or 
services. 

Monopolies are very old in history. They were frequently 
reserved by monarchs for their own profit, or were given by 
them to enrich a favorite, or reward a chief. Not unfrequently 
they were sold as a means of raising supplies. 

The monopolist holds almost absolute control over the prices 
of his commodity or services. ControlHng the supply, he can 
at will create an artificial scarcity, or, in other words, increase 
the difficulty of attainment, or effort demanded, as far as he 
chooses; and may thus raise the price to any point, up to the 
limit of men's needs for the goods in question, or at least up to 
the limit of their power to purchase. 

Monopohes are often useful, and sometimes necessary. They 
offer the hope of enormous reward for enterprises whose risks 
would otherwise prevent their being undertaken at all. Many 
of the discoveries and settlements on the American continent 
were stimulated by patents giving the monopoly of trade with 
the lands to be discovered or settled. 

46. Classes of monopolies. — Monopolies have been di- 
vided into four classes ('' Dictionnaire De L'Economie Politi- 
que."): 

I. Personal monopolies, or those which result from~the pos- 
session of superior faculties : as the genius of a great painter or 



HOW VALUES VARY. 53 

physician, or others, whose unequaled skill allows them to 
charge what they will for their services. 

2. Landed monopolies, or those resulting from the possession 
of lands, mines, and privileges connected with lands. 

3. Legal monopolies, or such as are retained by the govern- 
ment for itself, or given by charters to individuals or corpora- 
tions. The French and German governments hold the mo- 
nopoly of tobacco, which is raised, or imported, and sold by 
government agents, and yields a large government revenue. 
Our own government, as well as others, holds a monopoly of 
the post-office service, and of the coining of money. We grant 
to certain bank corporations the monopoly of supplying the 
country with paper money, beyond the treasury notes; and to 
railroad corporations the right to build railroads between certain 
given points. 

4. Monopolies of concentration, by which are meant those 
produced by' the concentration of capital, or by any business 
combinations. 

These last may be useful or injurious, according to the spirit 
of their use and control. 

47. Advantages and dangers of monopolies. — If their 
influence on production be alone considered, monopolies are 
doubtless beneficial. They stimulate production by lessening 
the risks and giving assurance of larger rewards than can ordi- 
narily be obtained where markets are free. But they are liable 
to such abuses that their existence should be carefully governed 
by restraining laws. 

It is evident that the values created by monopoly are often 
artificial and false, if not excessive. They are produced by in- 
terposing an artificial obstacle in the way of the attainment of the 
goods monopolized, and thus imposing an unnecessary pressure 
on the needs of mankind. 

The monopoly principle has penetrated and influenced every 
department of modern business. So powerful and enticing is 
this exclusive ownership as a means of controlling prices and se- 



54 POLITICAL ECONOMY. 

curing profits, that there is a constant temptation in the manage- 
ment of business to obtain, if possible, a monopoly of some 
kind and to some extent. The manufacturer who gains a mo- 
nopoly by producing fabrics of a novel pattern, or by securing 
for them a reputation for their style or excellence; and the 
merchant who gets the temporary monopoly of goods by the 
earhest importations, or by keeping Hues of goods not found 
at any of his competitors, gain their advantages by the uSe 
of legitimate and intelligent enterprise; and generally they 
are sufficiently guarded from the abuse of their power over 
prices by the felt need to keep on good terms with their 
customers, and to avoid the bad and ruinous reputation of 
extortion. 

The gigantic trade, transportation, mercantile and manufac- 
turing companies and corporations sometimes gain monopolies 
by overthrowing, or buying out all rivals, to keep the field 
clear for themselves. It is then in their power to tax, at will, 
and often with more audacity than the government itself, those 
who require their services or commodities. In general, the re- 
straining power of an intelligent public sentiment, and the eager 
desire to induce a larger patronage, are found sufficient to hold 
back these great corporations from a too serious abuse of their 
advantages. The value of their enormous constructive and 
productive energies to the country are well known. 

48. "Corners" and other monopolies. — The ''corners" 
contrived by speculators, in stocks and grain, are bad applica- 
tions of the monopoly principle. The parties creating the cor- 
ner get possession, as nearly as possible, of all the shares of 
some railroad, or other stock, or of the supply of some com- 
modity, and thus put themselves in a position to control the 
market price. They next make contracts with brokers, or 
others, to deliver to them, the corner makers, at the common 
or current rates, large amounts of the cornered stock or com- 
modity. Having thus created an artificial and imperative de- 
mand for this stock or commodity, they put on their exorbitant 



HOW VALUES VARY. 55 

monopoly price, and the duped brokers, or other victims, must 
purchase at these prices or forfeit the difference. 

Artisans, through their trade unions, sometimes attempt to 
gain a monopoly of labor by restricting the number of appren- 
tices who may be allowed to learn their trade, or by forbidding 
their members to work for less than some prescribed rate of 
wages. 

A sort of natural monopoly exists in the case of articles of 
rare occurrence, or of very limited production. The number 
of large diamonds, like the celebrated Kohinoor, is so limited 
that the possessor has a monopoly, and may set his own price. 
So, also, in the case of the great master-pieces of painting and 
sculpture, already noticed. The owners, knowing that they 
have the whole supply, are limited in their prices only by the 
height of the desire and the length of the purse of the pur- 
chasers. 

49. Abuses of monopoly. — The too common and often 
enormous abuses of the monopoly power must be held responsi- 
ble for those disturbances in the economic world which seem to 
contradict and discredit economic science. Monopoly is the 
intrusion of an external force into the realm of values. It adds 
no new element to value, but imposes upon the elements of de- 
sire and difficulty of attainment an artificial pressure. It is the 
usurped domination of the social and artificial element of own- 
ership over the two natural elements of utility and desire. 

50. Individual values and their variations. — The va- 
riations of value have another source in the fact that each of its 
elements is subject to two distinct and opposing estimations — 
that of the owner and that of the proposed buyer. It has 
already been shown that two sets of desires are brought into 
competition in every act of exchange. We may add that every 
article has two values, or, indeed, as many as there are individ- 
uals who desire it. And each value is real, though different 
from every other. TJie utility to the owner is often widely 
different from the utility to the buyer. So the efforts contem- 



56 POLITICAL ECONOMY. 

plated are never the same to both parties. The article may be 
easy of attainment to the one, and difficult to the other. The 
possession, also, may be of great importance to the one, and 
of none at all to the other. Hence, no value is the same to 
any two minds, for no two minds are alike in desires, power, or 
circumstances. 

No value remains constant to the same man, even; for no 
man remains constant in desires, needs, or environment. We 
often count as almost worthless to-day the things which, yester- 
day, we thought of high value. All this does not disprove the 
reality or certainty of value, but shows simply its variable 
character. 

51. Market values. — Values in general, as they are known 
in the markets, are, as before stated, not estimated by the de- 
sires or needs of individual buyers or sellers, but by the known 
or supposed wants of communities or classes of people. This 
general value we may call market value, to distinguish it from 
the special values described in the last section. 

The ordinary trader buys and sells the market values. He 
counts upon the existence and strength of certain common needs 
and tastes among his customers, and his success depends on the 
correctness of his perception and forecast, both of the kind and 
quantity of goods desired. 

So, also, the manufacturer manufactures for the market, and 
counts upon the market values. He shapes his products to 
meet the common wants. In general trade, the comparison of 
desires and efforts between individuals seems to disappear. It 
is, in reality, only replaced by another comparison — that of the 
individual value with the market value. When the would-be 
buyer estimates the value to himself as less than the market 
value, as stated by the seller, he refuses to purchase. 

The market value thus comes to rest, at last, upon the indi- 
vidual values; for, if it were higher than these, the demand for 
it would cease. By a great law of market gravitation, the value 
in market finds the level of the total individual demands. The 



HOW VALUES VARY. 57 

general variations of values with which the business world is 
concerned, are made up of the special variations of individual 
utihties and efforts. And so all changes of value, whether true 
or false, must rest finally upon a variation, real or supposed, in 
some one of the three elements of value. 

52. Gifts and keepsakes. — Men, from motives of poHcy 
or friendship, often donate goods, or sell them less than cost; 
but in such cases there is no new estimate of value. They do 
not lose their conviction that there is a real value, much higher 
than the price they charge. So, also, from the pressure of a 
present want, or from weariness with some long-used article, 
the owner sacrifices his property for a price below the real 
value; but in these cases there is a sense of sacrifice, and the 
true value is still judged to be that which its utifity and cost 
give. 

In the case of heir-looms and keepsakes, the owner often 
counts, as beyond price, things of little or no value ; but he will 
freely confess that it is not the value for which he keeps them, 
but from tender and sacred associations. 

53. Profit: — A final and, as it may seem, wholly arbitrary 
source of fluctuations in market values, or prices, is to be found 
in what men call profit. 

Profit, in its strict sense, means the advantage or value gained 
by the production or exchange of goods. In every successful 
effort in production, there is an excess of new value created 
over and above that consumed or used up. This excess of new 
value is profit. In the manufacture of cloth, the cloth pro- 
duced, by virtue of its new utility, is of more value than the 
wool, labor, and machinery used up in the manufacture. In 
the mercantile industry, the goods collected, transported, and 
properly stored and arranged for sale, are worth more than the 
original cost. These increments of value are the proper profits 
of the cloth-maker and the merchant. 

Profit furnishes the chief motive for ordinary production and 
trade. If no new values were created by their efforts, men 



58 POLITICAL ECONOMY, 

would have little or no motive for business. Their wants might 
compel them to change one valuable product into another, even 
at a loss ; but the great wealth-creating industries, if robbed of 
profit, would dwindle to the mere production of the necessaries 
of daily life. Profit is, therefore, a legitimate and needful de- 
mand of business. It is the very condition on which it exists, 
and by which it grows. 

True profit, which represents a real increase in values, is the 
rightful property of him who creates it. But there is an exag- 
gerated and false profit, charged by cupidity and extorted from 
ignorance, which represents nothing but the greed of its gainer. 

54. The elements of profit. — It is conceded that the re- 
turns and profits of a business ought to cover the entire expense 
for labor, materials, and machinery used up, interest on the 
capital invested, compensation for the risks run, and the proper 
pay for the time and managing ability of the proprietor or 
conductor of the business. These ought all to be represented 
in the new values created. Economic science recognizes these 
as proper elements of value, and as justly included in the prices 
charged. The thoroughly honest manufacturer and trader will 
limit themselves to these as their own. But, as few purchasers 
have the ability or leisure to learn the real cost of the goods 
they purchase, the manufacturer and merchant are left to fix 
their own estimate of the cost of their commodities, and to de- 
termine their own demands for profits, except as they are held 
in check by their sense of prudence and right, and by the com- 
petition of their rivals. Little wonder that the temptation to 
take excessive prices is sometimes too strong to be resisted, and 
that dishonest dealers take, as legitimate profits, all that the 
ignorance or needs of their customers will give them. But it is 
no remedy for the wrongs wrought by bad men, to denounce or 
deny the principles which they abuse. Frauds may justly 
quicken our vigilance, but need not fill us with universal 
suspicion, both of men and of truth. 

It seems needless to repeat that Political Economy, as a 



HOW VALUES VARY. 59 

science, has nothing to do with fictitious vahies or false prices, 
except to show the principles by the abuse of which they are im- 
posed upon men. Beyond that, the question must be sent to 
social science, or, further than that, to the cognizance of morals 
and the jurisdiction of law. 

The ceaseless gravitations which rule in the economic as they 
do in the material world, the steady pull and pressure between 
buyers and sellers, and between sellers themselves, are certain, 
in the long run, to bring prices to the level of values, and to 
bring values to the level determined by the relations of their 
several elements. And if this level is never reached except for 
a passing moment, it still remains the necessary ideal Hne from 
which all upward and downward movement must be measured. 
It is the constant "sea level" of the economic world. 



CHAPTER V. 



MEASURE OF VALUE. 



55. Its measure presupposes value. — The measure- 
ment of value constitutes so important a problem in economic 
science, that a brief chapter may well be given to its discussion. 
As an estimation of values must necessarily precede every ex- 
change or sale, and as value is most commonly thought of in 
connection with some proposition of exchange, and thought of, 
therefore, in an effort to measure it, it is not surprising that 
many economists should have confounded the fact of value with 
the act of estimation. Such is the origin of Bastiat's definition, 
"Value consists in the comparative appreciation of reciprocal 
services;" and of that of Prof. Perry, "Value is the relation 
of mutual purchase established by exchange between two 
services." 

It is true that the perception of value is clearest in the act of 
measuring it. All its elements are then necessarily passed in 
review; but, as already answered in a previous chapter, meas- 
urement necessarily presupposes the existence of the thing 
measured. 

56. Two kinds of measurement. — In trade, men seek to 
get as much as they give. Each party, therefore, to a trade, or 
exchange, necessarily measures the value of what he gives and 
of what he gets. This measurement is wholly private and par- 
ticular. It determines only the value to himself, and of the arti- 
cles actually compared. But there is a public and general 

measurement of the values of classes of goods, which determines 
(60) 



MEASURE OF VALUE. 6i 

their market value or price, and decides what each article of any 
class is entitled to exchange for in general. 

There are thus two measurements of value. The first is rela- 
tive, and consists in comparing one value with another, to deter- 
mine their equality or difference. The second is absolute, and 
is the comparison of any value with some standard of measure- 
ment, to determine its positive quantity as expressed in terms of 
the standard used. 

57. Relative measurement. — Barter. — Relative meas- 
urement, or comparison, is used in barter, or in the exchange 
of goods for goods, or for services, and it ascertains only equal- 
ity or difference. In case of difference, it ascertains also the 
ratio of difference, or the number of times one value is greater 
or less than the other. Thus, the value of some hat may be 
found equal to, or greater, or less, than that of a given coat; 
and, further, it may be determined that the one value is twice as 
large as the other. This estimation is personal and private, and 
fixes the amount of values only for the parties concerned in it. 

We have already seen that, ultimately, all values are individ- 
ual, each object having a separate and different value for each 
person desiring it. In the end, therefore, all values must re- 
duce to personal or private values ; hence the necessity of deter- 
mining the laws of measurement in this ultimate and relative 
estimation. 

In every exchange of commodities between two owners, each 
will estimate for himself both articles offered in exchange. 
There will be, therefore, four values put in competition. To 
illustrate this, take the following figure: 

Let A represent the owner of the horse, and B the owner 
of the carriage, 
which they wish 
to exchange. The 
lines a and a! 
represent A's val- 
uations of the Carriage^ 



Horse . 




62 POLITICAL ECONOMY. 

horse and carriage, and b' and b represent B's valuations of the 

same. In order to an exchange, a! must be greater than a, and 

b' must exceed b\ for the motive for the exchange is found in 

the gain that each party thinks he is making. The double gain 

is possible because of the double valuation. Each party to a 

fair trade may receive what to him is of more value than the 

thing he gives. No exchange can usually take place if either <2 

is greater than a' , or b is greater than b' ; for in either case one 

of the parties will, in his own estimation, suffer loss. 

It is not necessary, in this case of pure barter, that a shall 

equal b' , or that a' shall equal b; for, as the barterers have no 

common standard of value, they can not compare their several 

estimates of either the horse or the carriage alone. 

58. Relative measurement in sale. — In the case that 

each first puts a money price upon his property, the conditions 

of trade are changed, as the following figure may illustrate. 

Let each value his property at one hundred dollars. The 

money, we may assume, represents the same amount of value 

to both. As before, let A be the owner of the horse, and B 

A-^:; ~ "v Horse. the owner of the 

carriage, and one 

hundred dollars 

be the price fixed 

upon each. Let 

Carriage r — — -b^ "^^Ov .iT r j 

^- — — ^::^-r. the Imes a and 

a! represent A's estimates respectively of the two articles, and 

the lines b and b' represent B's estimates of the same. Let c 

and/' represent the equal estimates which each puts upon the 

one hundred dollars. Now the exchange will not depend alone 

upon the excess of a! over a, and of b' over b, but upon the 

relations of a and b\ and of b and a! . The lines a and b being 

each equal to c {c = c'), the exchange may take place if either 

a' or b' are greater than c; that is, if either A or B counts that 

he shall gain by the bargain, the other not losing, the trade 

may be effected. In general, both a' and b' must exceed c; 




MEASURE OF VALUE. 63 

that is, both parties must be tempted by a hoped for profit or 
gain. In this case it must be noted that a and b represent 
market values, while c^ and b' represent personal values, or the 
personal desires for the property sought. 

It is obvious that in cases like the .above, in which each 
party sets a price upon his property, there is a double sale; A 
sells his horse for one hundred dollars, and buys B's carriage 
for the same sum. But each immediately reduces the market 
value, in his own mind, to the personal, and feels sure that he 
has gained* as much by the bargain as the personal exceeds the 
market estimate. 

This difference between personal and market values is of the 
utmost importance in trade, as it furnishes the motive for all 
exchanges. 

59. Absolute measurement. — Absolute measurement is 
measurement by a standard. The common standard of meas- 
urement of values is money, and the measurement is the fixing 
of the price. This is rarely done by one or two persons, ex- 
cept as they take into account the general wants of those who 
are expected to purchase. It is, as we have seen, the general 
estimate of the buyers and sellers concerned that establishes 
market prices. We leave out of sight, in this statement, those 
fictitious prices imposed by speculators and monopolists, which 
are usually temporary, and confined mostly to a few classes of 
goods. Competition, and the various influences which deter- 
mine the course of trade, are constantly at work to rectify the. 
estimates of value and to make prices correspond to values. 

In sales of goods or services for money, the measurement of 
value is of the absolute kind. The money price is taken as the 
value; but, as has been shown, both buyer and seller take into 
account the personal value of both money and goods to them- 
selves, and count upon a gain of satisfactions, if not of values. 

60. A standard of value, — It is conceded that money is 
not a fixed and perfect standard of value. Like all other com- 
modities, it varies in utility and in purchasing power. Its 



64 POLITICAL ECONOMY. 

variability, through a long series of years, is shown both by 
the changes in its power to buy labor, food, and other com- 
modities, and by the differences in the rates of interest paid for 
its use. 

To find a fixed and constant standard of value, or "measure 
of prices," is one of the unsolved problems of economic science. 
It has long engaged the attention of economists, but has baffled 
all their attempts. The requirement is to find some commodity 
which remains, in all times and places,^ constant in value, or 
varies uniformly and by some known law. 

Several different standards have been proposed by as many 
different writers. Adam Smith proposed an ordinary day's 
labor as such a standard, and judged that the goods which, in 
different parts of the world, will purchase a common day's 
labor, will equal each other in value or price. A simple ap- 
peal to facts disproves this. The wages of labor vary con- 
stantly in the same country, and rarely, if ever, agree in differ- 
ent lands. Benjamin Franklin sought to improve on Smith's 
standard by limiting the labor to be taken as a standard to 
some one kind, and thought that labor employed in the pro- 
duction of wheat would serve best as a measure of values. 
But common labor in one department will evidently follow any 
fluctuation of common labor in all other departments. John 
Locke, Condillac, and others, proposed wheat or other princi- 
pal bread-stuff of any people, as the standard. Say recom- 
' mended wheat for distant times, but not for distant places. 
But it was easily shown, by statistics, that wheat varied in 
price with the shortness of crops, with the prosperity of other 
industries, and with wars. Nor is the average price of wheat 
taken for a long series of years, constant with its average for 
the next like series. Slaves, land, and other kinds of property 
have also been offered as the desired standard; but to all nearly 
the same objections apply. 

6i. The compound or tabular standard. — Despairing 
of finding any single standard, later economists have attempted 



MEASURE OF VALUE. 65 

to construct a compound, or tabular standard, by taking a large 
number of leading commodities of nearly universal use, such as 
labor, land, wheat, sheep, beef, wool, flax, cotton, tea, coffee, 
sugar, salt, etc., and finding the mean of their average varia- 
tions. It is assumed that the rise in the values of some of 
these articles will be compensated by the fall in others, and 
that the mean will prove to be nearly constant. Prof. Jevons, 
who made a computation based upon forty different articles, 
has recommended the tabular standard, based upon at least one 
hundred articles. Gen. Francis A. Walker, in his "Money, 
Trade, and Industry," says: "So far as I am able to judge, 
the scheme has not a single weak point." The proposition of 
Mr. Joseph Lowe, of England, the inventor of this scheme, 
was that a commission of competent persons should be em- 
ployed to collect and tabulate the prices of the articles chosen. 
Jevons and Walker propose that the commission shall publish, 
periodically, their decisions, as well as a tabular statement of 
the prices on which it is based. This standard of value is not 
designed to supersede money as the ordinary measure of prices 
and values, but it is proposed that the fluctuations of money 
shall be corrected by the tabular standard. For this purpose 
the value of money by the tabular standard, would be noted on 
every long-time contract at the time of making it, and cor- 
rected by the same standard at the time of payment. 

The Hon. H. C. Burchard, director of the United States 
mints, in his report for 1881, made an important contribution 
toward the establishment of a tabular standard, by collecting 
the average prices, through a period of fifty-six years, of nearly 
a hundred different commodities. 

62. Utility of a true standard.— The need of a constant 
standard is to be found in those contracts which allow long 
times of payment, and also in the measurement of legacies and 
permanent investments for the benefit of heirs, or of public 
eleemosynary, educational, or other institutions. It would also 
find place in maintaining at an equal level fixed salaries, taxes, 

p. E.— 6. 



66 POLITICAL ECONOMY. 

and other annual payments, made to run through a long series 
of years. 

The need of such a standard was forcibly illustrated during 
and after our late civil war. Debts contracted when the dollar 
was at par, or worth one hundred cents in gold, were often due 
and paid when the dollar had dechned to be worth no more 
than thirty-five or forty cents in gold. In these cases the cred- 
itors lost the largest part of their dues. On the contrary, debts 
made during the war, when the dollar was worth only one-half 
of its face, were required to be paid years later, in dollars 
worth nearly or quite one hundred cents in gold. So salaries, 
established before the war, at two thousand dollars, were worth 
during the war, and for years afterwards, one thousand or less. 
Endowment funds, invested for the support of public institu- 
tions, have been found strangely inadequate in subsequent 
times, because of the changed value of their incomes. 

The real difficulty in finding a constant standard of value lies 
in the variable nature of value itself. And as the sources of 
these variations are planted in the mental and social conditions 
of the race, it may be questioned whether such a standard 
would not prove illusive if not injurious. Value is a matter of 
the moment, and responds to an existent state of want and rela- 
tionship. The toy represents to the child what the splendid 
mansion does to the man. The paint and the eagle's feathers 
are to the savage what the crown of jewels and the royal robe 
are to the white monarch. The wealth of distant ages, and of 
alien peoples, can only be compared in connection with their 
civihzations. Practically, a fixed standard of value is of conse- 
quence in such cases as those mentioned, and then only for a 
single generation or less. 



CHAPTER VI 



WANTS AND UTILITIES. 



63. The circle enlarged. — We bring forward, once more, 
for a further illustration, our triangle and circle. The triangle 
of value has been sufficiently discussed to show its central 
character and importance. The 
discussion must now pass be- 
yond its lines into the ever-wid- 
ening circuits of wants, work, 
and* wealth. 

The notion of value, with its 
threefold character, is not to be 
left behind, nor lost sight of. 
It is every-where the central 
idea, and the key to all the 
rest. It responds to all mate- 
rial wants ; it energizes all work ; it is the significant fact in all 
wealth. 

Central in every act of exchange between children or men, 
in every purchase or sale, in every contract and business en- 
gagement, in the gigantic transactions of great corporations and 
in the widest calculations of a world-embracing, world-enriching 
commerce, from the want and work of an hour to the mighty 
industries which employ and feed the world's uncounted mill- 
ions, the notion of value mingles with it all, and gives the 
business character to it all. 

64. Wants and utilities reciprocal. — To the idea of 

(67) 




68 POLITICAL ECONOMY. 

want, value always answers as the gratifying utility. When 
merchant and manufacturer look out upon the wide world of 
human wants which constitute their market, they unconsciously 
turn to the utility of their goods as the natural correlate and 
response to these wants; and so, too, the thought of the utilities 
they are producing, summons into sight, as the other side and 
counterpart, the wants which these utilities presuppose. The 
full discussion of the one must necessarily involve the survey 
of the other. 

Just as in the world of work, values are thought of as the 
products of such and such efforts; and as in the world of 
wealth, they are thought of as possessions having purchasing 
power ; so in the world of wants, they are uniformly and 
always, of necessity, thought of as utilities having power to 
gratify. Those economists are wrong who assume that value is 
always thought of as a relation of goods offered or given in 
exchange. 

65. Want and utility defined.— The word want, in strict 
use, means something lacking. It is the felt lack of something 
required to gratify a human need, desire, taste, or appetite of 
mind or body. In Political Economy, want is any need or de- 
sire which seeks its gratification through labor or the products 
of labor. 

The word utility must be given an equally wide meaning. 
It embraces not merely the useful, in the narrow sense, but all 
things which have the power to gratify any desire, or to aid in 
getting such gratification. 

Want and utihty mutually imply each other. Want is a 
craving which utility satisfies. Want is an inward feeling; 
utihty its external object. Want precedes; utility follows. 
Want is original ; utility is its derivative. Want is positive and 
necessary; utility is conditioned upon it. Utihty is limited by 
the want it gratifies ; when the want ceases, the utility ends. 
It is in the nexus of want and utility that Political Economy 
unites its mental and material sides or aspects. Looking in^ 



WANTS AND UTILITIES. 69 

ward, it is a mental science; looking outward, it is a material 
science. 

66. Vast extent and influence of man's wants. — The 

wants of man are practically endless. Human life is a recur- 
ring series of needs and desires. They return afresh after each 
gratification. They multiply with the growth, they change 
with the character, and vary with every varying condition of 
man and society. They constitute the motives of all voluntary 
action, and measure the fullness and force of all sentient 
life. 

Civilization is to be known and estimated chiefly by the num- 
ber and character of its wants. Every advance in civilization is 
accompanied, if not produced, by the elevation and increase 
of human wants. The savage has few wants, and these are 
simple and mostly sensual, yielding but low and brutal pleas- 
ures, and lending to its employments only a feeble and fitful 
force. The needs of the civilized man are as endless as his 
resources. They sweep through the entire range of his sensi- 
bilities and his intelligence, filling his life with pleasures both 
elevated and intense, and giving to his enterprises an impulsive 
force as powerful as persistent. 

It is an error as grotesque as it is false to conclude, as 
Rousseau did, that civifization is an evil because it adds to 
man's wants. The increase of wants is the increase of motives 
and of opportunities. It is the widening of the field of life that 
widens the scope of desires. If the civilized man is inferior in 
condition to the savage, because of his greater needs, then is 
the savage inferior to his dog for the same reason, and the dog 
is inferior to the oyster. The argument of Rousseau shows its 
falsity by the absurdity of its conclusions. But it is also false in 
its facts; for the savage, or man in the state of nature, is not 
content. And the discontent of the savage is real, for he lacks 
the necessaries of life; the discontent of the civiHzed man is 
often imaginary, arising from the indisposition or neglect to 
enjoy the abundance which surrounds him. 



70 POLITICAL ECONOMY. 

.67. Non-economic wants. — Not all wants demand labor 
for their gratification. Many of the bodily needs, and still 
more of the spiritual, are met by gifts of nature, by material or 
spiritual conditions and environments which come without 
effort. Nature gives light for the eyes, air for the lungs, water 
for the thirst, and sunshine and its warmth for man and soil, 
without labor and without price. She also gives, freely, beauty 
to gratify the aesthetic taste, truths for the intelligence, and facts 
for the understanding. In many cases also nature furnishes, 
without human labor, food and shelter. 

Wants thus met by the free utilities of nature cost no efforts, 
and give rise to no values. Such wants do not count among 
the economic forces, though these free utilities, helping to swell 
the aggregate of the resources of life, have sometimes errone- 
ously been counted among the world's wealth. They belong to 
wealth only in that figurative sense in which we speak of rich 
mines and of a rich soil, and in which use is put for value. 
Only labor can create value; and nature's gifts, however high 
their utility, and however vital or many the wants they gratify, 
are never counted as goods, in the world's market, till touched 
by the hand of toil. 

Many wants are also suppressed by men as beyond their 
means of gratification. The poor habitually suppress many 
desires, and few men have wealth enough to , gratify all 
their wants. These suppressed desires are not actual, but 
only possible economic forces. They become active when 
easier production and cheaper products allow them to be 
gratified. 

68. Economic or demand wants. — The wants which 
count in economic science are those which can be gratified 
only by labor or its products, and which men are either 
unable or unwilling to suppress. These wants constitute the 
market demand for goods or service, and may be called 
demand wants, or simply demand. 

There is a class of wants which can be met only by personal 



WANTS AND UTILITIES. 71 

service, which may be rendered by hired servants and profes- 
sional aid, or by the gratuitous help of friends. Such are the 
care and nursing required by those in either extreme of life, or 
by the sick and the unfortunate. It includes, also, the wants 
and desires met by professional service, such as that of the 
teacher, the lawyer, and the physician. The power to render 
service is also an economic value, but limited in the character 
of its ownership, which can not be transferred except in use 
and temporarily. 

6g. Estimation of wants. — Wants are estimated both by 
those who feel them, and by those who propose to provide for 
them. In the actual business world, they are mostly estimated 
by manufacturers, merchants, and others, who hope to make 
their profits by meeting them. But this public estimate must 
necessarily rest first, if not finally, upon the private estimate 
which every man makes of his own desires. 

Personal desires all relate to pleasures which we wish to 
enjoy, or to pain which we wish to avoid. 

Jeremy Bentham said, "To a person considered by himself, 
the value of a pleasure or pain, considered by itself, will be 
greater or less, according to the four following circumstances : 
I. Its intensity; 2. Its duration; 3. Its certainty or uncertainty; 
4. Its propinquity or remoteness." He also adds, as circum- 
stances giving power or value to a pleasure or pain, ' ' Fecun- 
dity, "ox the chance of being followed by others of the same 
kind; purity, or chance of not being followed by others of the 
opposite kind; and extent or the number of persons to whom 
the pleasure or pain extends." All of these, doubtless, have 
to do with the personal estimate which each one makes of his 
own desires and aversions. But the public estimate of human 
wants made by those who seek to learn the market demand for 
goods which may gratify desire, or save men from pain and 
trouble, must rest upon other and larger, if also less scientific, 
classifications. 

70. Classes of demand wants. — Several classifications 



72 POLITICAL ECONOMY, 

of economic or demand wants, though lacking in scientific 
precision, will be found useful in studying their economic rela- 
tions. We notice some of the principal ones : 

1. Vital and non-vital. — Vital wants are those whose gratifica- 
tion is necessary to the continuance of life. The goods which 
satisfy them are called necessaries. These are chiefly food, 
and the means of procuring or conserving warmth, such as 
clothing, shelter, and fuel. 

The non-vital are those whose gratification yields pleasure, 
but is not necessary to life. The goods which gratify these 
wants are called luxuries. The line of division between these 
two classes of wants is not fixed and immovable. Luxuries 
may not only become necessaries by use, but the pleasures they 
afford are often the means of increasing or conserving vital 
energy. 

The vital wants are universal, and can not be suppressed 
or held in abeyance. The market demand for necessaries is, 
therefore, large and nearly constant. The supply must also 
be abundant and constant. But, as these wants are nearly 
fixed in their limits, the conditions of scarcity and glut of 
the market will be more frequent than in the case of other 
goods. 

The non-vital wants or desires for luxuries have a wider 
range, but are less constant. They vary with tastes and fash- 
ions, and have a large choice of gratifications; hence, produc- 
tion of any one kind of goods is less abundant, and scarcity 
and glut will be less frequent, though the market will be more 
fickle and more difficult of calculation. Necessaries mark ex- 
istence; luxuries mark pleasure. 

2. Physical and mental wants.— VhysicdiX wants include all 
bodily appetites and needs, which are met either by material 
goods or by personal services. They embrace the vital wants 
and most of the desires for physical pleasures. 

The mental wants include all gratifications of the intelligence, 
and of the aesthetic, mora], and religious nature of man. These 



WANTS AND UTILITIES. 73 

gratifications come sometimes through physical agencies, as 
works of art, books, and instruments of music, and sometimes 
through personal services of professional men, artists, or other 
laborers. 

The goods which answer to the physical or animal wants are 
chiefly nature's products or commodities, in which the gifts of 
nature enter as a chief factor. The utility of these goods are 
found in the natural properties they possess. Our foods, cloth- 
ing, houses, machinery, and vehicles are valued according to 
the sterHng material quaUties they possess. The goods which 
serve the spiritual or mental needs of men are those in which 
the efforts of high skill and special genius are involved. The 
natural material properties count for little, but the ideas in- 
volved, or represented in them, count for much. 

It is obvious that the distinction between physical and mental 
wants is not wide nor always clear. The one mingles with, 
and shades up into, the other. We choose our clothes partly 
for comfort and partly for good looks, and we build our houses 
as much for our minds as for our bodies. We look for 
warmth, for durability of texture, and for substantial structures ; 
but we seek, also, beauty of form, for gracefulness of style, and 
pleasing proportions. 

As men emerge from savagery, and march upward in civil- 
ization, the mental wants advance beyond the physical, and the 
markets for these higher forms of value open and grow stronger. 
It is here that education, civilization, and morahty become eco- 
nomic factors. They multiply and elevate desires, and diversify 
and improve products. 

3. Immediate and future wants. — All wants are present as 
feelings, but some ask an immediate gratification, while others 
look to a future. The real want, in the latter case, is 
anticipated as likely to exist in coming time. 

Immediate wants demand immediate gratification. They 
give motives for the purchase of goods already in market and 
ready for use. They are strong because immediate, and often 

P. E.-7. 



74 POLITICAL ECONOMY. 

act with a much greater force than that of greater wants lying 
in the future. They are the actual market demand of the 
hour. 

Future wants are the motives of prudence and economy, of 
business forecast and enterprise. It is this care for coming 
needs and gratifications which furnishes the motive power for 
the immense machinery and the grand movements of the in- 
dustrial world. The accumulated wealth of mankind owes its 
existence to this regard for future wants, and its value is main- 
tained by the faith men have in those wants. The difference 
between savage and civilize'd men, as also between the idle 
and improvident, and between the industrious and enterprising, 
lies largely in the different force which the future exercises 
over them. 

In the estimation of the value of any article offered for sale, 
the present want is weighed against the future, and many ex- 
changes of a less present value for a value greater but future, 
can be explained only in this way. A sad but forcible illustra- 
tion of this improvidence is found in the inebriate who sacri- 
fices all provision for his family and himself to the present 
gratification of his appetite. 

Present gratifications are temporary; future ones are thought 
of as continuous or enduring, and they gain in power by this 
promise of permanency. 

4. Special and general wants. — Special wants belong to par- 
ticular occasions, or to individual men or classes. General 
wants are such as are common to the whole community. 
Special wants may be more or less limited, and the values an- 
swering to them will have a like limitation. When limited to a 
single person, as in case of an artificial tooth, the value, though 
real, lacks exchangeability — another proof that purchasing power 
is not identical with value. 

Utility can never be wider than the desires it gratifies; but 
the value may be more widely recognized, and bought and sold 
by those who have no use for the goods. Special values will 



WANTS AND UTILITIES. 75 

obviously be more liable to fluctuations than those of more gen- 
eral character, because desires common to all are less likely to 
change or cease. 

Certain special desires become so strong by habit as to be- 
come a sort of physical madness ; as, for example, the appetite 
for opium, for tobacco, and for strong drinks. These seek their 
gratification at all hazards and at whatever cost. The enor- 
mous profits of the liquor traffic are due mainly to this cause. 
As in the case of monopoly, the seller plays upon the element 
of desire, almost without reference to the effort involved in the 
manufacture. 

5. Primary and secondary wants. — Some goods give immediate 
gratification of themselves; others simply aid to obtain desirable 
things. Our desire for the former is a primary want; the de- 
sire for the latter may be called secondary. Man's desire for 
bread is primary ; he wants it for the gratification it gives. But 
the desire for a plow is secondary; it is wanted as a means 
of getting bread. 

Secondary wants come from the primary. The need for the 
plow is derived from the need for bread. The value of 
secondary gratifications depends therefore upon that of the 
primary. 

In the business world, secondary wants are most numerous. 
Lands, store-houses, money, merchandise, ships, carts, manu- 
facturing machinery, and tools are wanted not to gratify the 
primary desire for enjoyment, but as a means of winning wealth 
and getting other enjoyments. 

As the business wants are chiefly secondary, so the values 
engaged are mostly secondary. Men trade on the desires of 
other men. They manufacture and buy and sell to gain wealth, 
though their ultimate aim is, of course, personal gratification. 
Hence, as we have seen elsewhere, in the common estimation 
of primary values, or goods for use, the trader weighs the 
desires of consumers, and not his own. 

The love of wealth is, properly, a secondary desire, but it 



76 POLITICAL ECONOMY. 

may become primary. Men often seek wealth beyond all pos- 
sible needs, from the simple love of gaining and having. They 
enjoy wealth as wealth. Its mere possession brings to them a 
certain power and influence which are a gratification. This 
constitutes an immense force in the business world. In its 
intenser form it makes the miser. 



CHAPTER VII 



DEMAND AND SUPPLY. 



71. Demand defined. — In pursuing the study of human 
wants, we come in sight of the oft-quoted, though not well- 
understood, law of supply and demand. We have already 
shown that demand-wants are such as men have the power and 
the will to gratify. The demand for any commodity is made 
up of all such desires for it as come to market to purchase. 
The demand for wheat, for example, will be made up of the 
wants of all who wish wheat for any purpose, and who are 
able and disposed to buy it. 

Market, as commonly understood, means any customary 
public place of sale of one, or several, classes of commodities. 
In this chapter, and generally in political economy, the word is 
used to denote the aggregate need and disposition to purchase 
any given commodity, existing at any given place or time. 
Thus, the market for wheat is the demand for wheat by actual 
purchasers and consumers. In this sense of the term, there is 
no direct reference to any special place of sale. 

The demand will never exceed the real or supposed wants of 
mankind; but it may, and often will, fall short of these wants; 
for those who can not produce or purchase the goods in ques- 
tion, must suppress their desire or find a substitute. There is 
always a volume of wants of this latter class which may, at any 
moment, when circumstances favor, be added to the actual de- 
mand. The demand of one day may be doubled the next if in 

any way the price is made, suddenly and largely, to decline, 

(77) 



78 POLITICAL ECONOMY. 

72. Supply defined. — Supply, in its simplest definition, 
includes the goods, at any moment, held for sale. It is the 
amount of any given commodity available to meet the demand 
for that commodity. Goods not open to purchase, do not 
properly constitute any part of the supply. There are always 
large masses of wealth in the world which are not for sale. 
Men of wealth hold large estates of land, and numerous herds 
of domestic animals, to gratify their own love of grandeur and 
display. These lands and herds can not be counted as a part 
of the market supply of these goods. So, also, wheat may be 
held in reserve, for future use or for speculation; and in this 
case it is, for the time, withdrawn from market, and is counted 
as no part of the actual supply, though it remains a potential 
or possible supply. 

In a general sense, it may be said that all the wealth of the 
world constitutes the supply of the world's wants; and in this 
sense all wants are demand, and all wealth is supply. But in 
the strict sense of the terms, as employed in the market laws 
of supply and demand, they must be understood as including 
only wants in market, and the goods offered for sale. The 
French economists call these, Voffre et la demande — the offer and 
the asking. 

The demand and supply are not always those of the hour, 
but often necessarily include all that are to be met during a 
period of time. The harvest of the summer is the natural bread 
supply of the year. So the merchant imports his supply of 
goods for the season, and the demands in these cases include 
all the desires which will appear for gratification during the 
period. 

It is obvious, from these statements, that demand and supply 
are not fixed quantities. Beyond the actual demand there is 
always a large possible demand, reaching out to the last limit 
of human wants. So beyond the actual supply, there is a large 
possible supply stretching to the entire mass of the production, 
actual or possible. 



DEMAND AND SUPPLY. 79 

73. Demand and supply reciprocal. — These two, de- 
mand and supply, stand over against each other, the two 
gigantic factors or forces of the world's markets. Knit together 
by reciprocal relations, as the asking and offer, the desire and 
its gratification, they have long been recognized as giving law 
to market values and prices. 

Each supposes the existence of the other. True demand is 
not a vague or indefinite desire for some gratification, but the 
specific desire for a known commodity. All men may like to 
ride and to enjoy the shelter of a roof, but the demand for 
actual horses known to be in market, and for mansions or 
houses known to be for sale, comes only from those who feel 
themselves able to purchase and possess these things. On the 
other hand, supply looks to existing desires and askings. It is 
the offer of goods to those thought to be purchasers. 

The laws of supply and demand only exhibit, on a larger 
scale, the relations which exist between the two parties to a 
simple exchange or purchase. Demand is the aggregate de- 
sires of many purchasers, and supply the cumulate offer of 
many sellers. The difference between these aggregates and the 
simple cases which they involve, lies chiefly in the uncertainty 
as to the amounts of the aggregate demand and supply. In the 
simple exchange, the quantities are supposed to be in sight, 
and no question necessarily arises as to other desires or other 
offers. But in the grander market movements, the buyers and 
sellers are two uncounted multitudes partly hidden from sight. 
The number and extent of the wants, as also the sources and 
amount of the supplies, are always partially unknown. 

The utility and necessity of the general law come from this 
uncertainty. A single instance requires no law. Its conditions 
are visible. It is only when we need to grasp a large class of 
cases, stretching beyond our power of vision, that we call in 
the aid of a general law or principle. 

The law itself is discovered by the study of single cases. 
We mount from the particular to the general, only that we may 



8o * POLITICAL ECONOMY. 

have the means to judge and determine all coming particulars. 
The law, once discovered, remains forever true, though we may 
find still some uncertainty in our application of it. 

74. Laws of supply and demand. — The market laws of 
supply and demand may be stated as follows: 

1. When demand and supply are equal, values and prices 
remain at their natural level, as determined by cost. 

2. The supply remaining constant, the value will vary di- 
rectly as the demand — that is, if the demand for an article in- 
creases, the value will increase; if the demand diminishes, the 
value will diminish, as shown by the prices, which are to be 
counted in general as the measure of value. 

3. The demand remaining constant, values will vary inversely 
as the supply. Increase of supply will lower values, and de-" 
crease of supply will enhance them. 

These laws may be more concisely stated in one as follows : 
Values vary directly with the demand, and inversely with the supply. 

It might seem wiser to state these laws as concerning prices, 
since it is the price that appears always to be affected by the 
variations in supply and demand; but the changes in price are 
supposed to represent changes in value (not in utihty), and 
have no significance except as they do represent such changes. 
Economic science has nothing to do with false and fraudulent 
prices which represent only the fraud of the seller and the ig- 
norance of the buyer. It is evident that a seller may ask more 
than the market or current price, and that an ignorant or_ care- 
less customer may give what is asked, and that this may be 
done without any relation to the actual demand and supply, 
but such a case, however many times repeated, does not 
properly bring into question or doubt the laws already stated. 

Thornton (on Labor) contradicts Mill and other economists, 
and affirms that selling prices never depend on supply and de- 
mand, basing his argument on the fact that sellers often fix 
their prices without reference to the supply of goods on hand. 
He loses sight of the fact that the merchant lays in his supply 



DEMAND AND SUPPLY. 8i 

to meet the demand of the season, and not the demand of the 
hour. He takes no account of the monopoly prices based on 
an artificial scarcity, caused by the seller's withholding his 
goods till his own price is offered. 

As the real supply and demand can only be approximately 
known, each buyer and seller is left to make his own estimate 
of them, and hence there may be several prices asked and paid 
in the same market, the same day; but this does not disprove 
the law. It only proves that the law is operative as far as the 
facts are known, and no further. 

The positive proof of the truth of the laws of supply and de- 
mand is to be found in the constant appeal made to them in 
actual life, and the constant efforts of traders to ascertain the 
real supply of their commodities. 

75. The laws explicated. — The philosophy of these laws 
may easily be seen from the principles already stated in previ- 
ous chapters. The increase of demand beyond supply is the 
excess of desire beyond the means of gratification. The conse- 
quent scarcity increases the difficulty of attainment, or the 
efforts required, and this in turn increases the value. But an- 
other, if not the chief reason of increase of price, is found in 
the partial monopoly which nearly always attends a sudden in- 
crease of demand. As only a part of the existing desires can 
be gratified, there are two or more buyers for each article to 
be sold, and the element of effort is pushed higher by the 
anxiety of each party not to go unsupplied. 

In the case of diminished demand, another principle prevails. 
The diminution of demand leaves an excess of goods or gratify- 
ing power over the existing desires, or those of the period for 
which the supply is designed. Such excess having no desires 
to gratify, has, of course, no immediate value ; but as this ex- 
cess can not be separated from the part of the goods in" demand, 
the loss of value tends to distribute itself over the entire quantity 
of goods of that kind. 

Suppose a community to have a full supply of peaches to 



82 POLITICAL ECONOMY. 

meet all demands. Now let some sickness, or other cause, 
suddenly destroy half the demand for this fruit. It is evident 
that only half of the supply will be wanted ; the other half, if 
there is no foreign demand, will be worthless, as there will be 
no buyers for it. Each seller, fearing to have the worthless 
surplus left in his hands, reduces his price in the hope of thus 
securing the sale of all his stock. Other dealers doing the 
same, the loss tends to spread itself over the entire stock on 
hand. If all had combined to destroy the excess, the price 
would have remained unaffected. Cases are not wanting in 
which owners have recognized the valueless character of the 
surplus, and have deliberately destroyed it rather than cheapen 
the price of their commodities, knowing, as they did, the 
difficulty of restoring prices to the old standard. 

A varying supply presents, evidently, only the same cases 
conversely stated. The increase of supply works the same re- 
sult as the decrease of demand; and the diminution of supply 
gives the effect of an increase of demand. There is, however, 
an important difference in the effects of the cases, as will be 
seen further on. 

It is evident that the general law might be stated simply as 
the law of excess and deficiency of demand alone, or of supply 
alone. Thus it might read : An excess of dema7id raises the value, 
and the deficiency of demand lowers it. Or, leaving demand out 
of mention, we might read: The excess of supply lowers values, 
and the deficiency of supply raises them. 

76. Limitations of these laws — upward. — These fa- 
mous market laws, though involving important truths, are by 
no means" so comprehensive and potential as they seem. There 
are other relations and reactions between supply and demand 
which essentially modify the force of these laws. An examina- 
tion of the several cases in detail will show some noteworthy 
results. 

Case I. — Let the supply of any commodity become excessive. 
The immediate effect is to cheapen the price ; but this cheapen- 



DEMAND AND SUPPLY. 83 

ing brings the commodity within the purchasing power of a 
larger number of consumers, and thus increases the demand. 
This restores the equiHbrium between the supply and demand, 
though at a lower level of value, and checks the fall of prices 
below that level. The introduction of the several inventions in 
cotton manufacturing machinery, greatly decreased the price of 
common caHcos. The retail prices fell successively from fifty 
cents a yard to twenty-five, fifteen, and ten cents a yard. But 
at each reduction the demand increased and held the price firm 
till another improvement in manufacture multipHed again the 
supply and occasioned another fall. Thus, in nearly all cases 
the fall in price is followed immediately by an enlargement in 
the demand. But another reaction may set in if the fall in 
prices lessens too much the profits of production. In this case, 
the production will be abandoned by some of the manufacturers, 
or will be less urged, and so the equihbrium may be reached by 
lessening the supply. 

Case 2. — Let demand be in excess, and an opposite train of 
consequences may follow. At first, the price rises in proportion 
to the scarcity. This increase of price drives from market the 
poorer class of consumers, and thus lessens demand. The 
equilibrium established again between the offer and the asking, 
the prices remain stationary, though at a higher level, till a 
further increase of demand repeats the process. 

But the increase of price stimulates production, and thus in- 
creases again the supply, and the upward movement of prices is 
checked before they reach their highest possible limit. 

Thus it will be seen that in both of these cases two sets of 
forces are at once set in motion to restore the balance between 
supply and demand so soon as it is disturbed in either direction. 
The normal condition is that of equilibrium between these two 
market factors, and they can not long be kept out of balance. 
Should the supply of any commodity be permanently shortened, 
the consumption would fall to the nev/ point of supply, and re- 
main there. Or, should any demand be permanently lessened. 



84 POLITICAL ECONOMY. 

as is often the case with goods out of fashion, the supply would 
be speedily reduced to the same level. 

77. Limitations — do^?vnward. — In the two cases consid- 
ered, the excess of supply or demand was supposed to result 
from an upward movement of desire or of production. Let us 
now consider the effect if the equilibrium is destroyed by the 
downward movement of either. 

Case 3. — A diminution in demand would leave supply in ex- 
cess, as certainly as an increase in production. And this ex- 
cess, like the other, would reduce the price. But in this case 
the excess marks, not an increase of goods and of the general 
wealth, but a decrease either of desire or of purchasing power, 
since demand would fall with each. The new demand, spring- 
ing from diminished price, will less often appear under these 
circumstances, and the balance between supply and demand 
must usually be reached by the path of diminished production. 
The changes of fashion afford many illustrations of this case. 
Goods out of fashion may, sometimes, find a limited increase 
of market among the poor, but not sufficient to maintain the 
manufacture. The hoop-skirt factories were soon out of work 
when these skirts went out of fashion. 

Case 4. — Finally, a diminution in production may leave de- 
mand in excess, as surely as an increase in desires. But in 
this case, the diminished supply means, usually, diminished 
wealth, and not unfrequently, general distress and hard times. 
Short crops and the desolations of war afford us instances of 
such diminution of supply below the demand. The increasing 
prices may still lessen the number of purchasers, as in Case 2, 
but they rarely stimulate, to any great extent, the new produc 
tion. The equilibrium is reached by the dying out of all 
demand which can not afford the gratification at the higher 
prices. 

78. Artificial limitations. — Several other causes also in- 
terfere with the action of these laws of supply and de- 
mand : 



DEMAND AND SUPPLY. . ■ 85 

1. The hope of a better market in future often leads to the 
withdrawal of goods from market, and to this extent relieves 
the glut by lessening the offer. This is feasible with goods 
which do not perish by storing, and with such, also, as have 
only a limited market. In the case of agricultural products, 
such as grain, fruits, and cattle, this withdrawal from sale is 
often dangerous and expensive. The fruits may decay, and 
the cattle must be fed. 

2. When goods are sufficiently cheapened by an oversupply, 
they may sometimes find an outlet in foreign markets. The 
wonderful facilities of modern commerce have vastly diminished 
the dangers of both scarcity and glut, and have done much to 
maintain the equilibrium of markets and the steadiness of 
prices. 

3. On the other side, the necessity of giving employment to 
labor, and to capital already invested, often compels continued 
production after supply is in excess. English manufacturers 
have lately been obliged to run their mills, sometimes at a loss 
upon the goods manufactured, in order to avoid a greater loss 
in the departure of their skilled operatives and the deterioration 
of their machinery. It is said that cargoes of English goods 
have sometimes been shipped to foreign markets to be sold 
under cost, in order to relieve the home market and give em- 
ployment to men and machinery, 

4. Monopolists sometimes interfere with the laws of supply 
and demand in order to maintain high prices. The monopolist 
restrains supply and creates an artificial scarcity. He does not 
subvert the law, but employs its force to his own advantage. 
This, it should be remembered, is an abuse of monopoly, not 
its necessary action. 

5. Speculators create a false demand by exciting hopes of a 
large increase in values, without regard to the supply. They 
induce a feverish present demand for lands, grain, or stocks by 
skillfully parading the prospects of a larger future demand. 
While it continues, this fictitious demand is as powerful as a 



S6 POLITICAL ECONOMY. 

real one to enhance values. It may be claimed, therefore, as 
a proof of the laws rather than as an exception to them. 

79. Limitation by prospective and new utilities. — 
I. As all business looks, partly at least, to future profits, and 
hence also to future production, present prices must necessarily 
feel the influence of prospective supplies or demands. The 
promise of a large harvest in the coming season, will often act 
like a present increase of supply, and lower the price of the 
grain on hand. The prospect of a large importation of goods 
from abroad, will diminish the value of the same kinds of goods 
at home. 

On the other hand, the fear of a poor harvest will increase 
the demand for the present supply of breadstuffs, and will give 
it additional value. The interruption of trade with the tar and 
turpentine producers of North Carohna, at the opening of the 
war, more than doubled the price of all the turpentine then in 
market. 

2. The discovery of a cheaper or better substitute for any 
commodity in market, will have the same effect as a large in- 
crease of the supply of that commodity. The invention of 
paper speedily drove parchment out of the book market by re^ 
ducing its value below its cost. So also the art of printing 
ruined the business of the manuscript writers, by multiplying 
the supply of books. The products of the power-looms have 
in the same way displaced the expensive coarser fabrics made 
upon the hand-looms of earlier times. 

3. The finding of a new use for any commodity gives a new 
demand for it, which is equivalent to increasing the old de- 
mand. The invention of straw wrapping-paper gave a new de- 
mand for, and an increased value to, straw in the neighborhood 
of the mills. The many new uses found for iron in modern 
machinery, railroads, and iron ships multipHed many times 
over the demand for this useful metal, and must have raised 
enormously its value had not the stimulated production kept 
near pace with the need. Nickel was discovered in 1751, and 



DEMAND AND SUPPLY. 87 

had some value for such alloys as German silver; but it was 
not till after the discovery of its use in nickel-plating, a few 
years ago (1869), that the demand became important, 

80. The laws vary with goods. — The action of the laws 
of supply and demand varies somewhat with different classes 
of goods. Goods which are necessaries, because demanded by 
the vital wants, can never go wholly out of quest, though the 
consumption of them may be largely reduced in a time of 
scarcity. Luxuries, on the other hand, may be driven out of 
use, or nearly so, if the diminished supply shall raise the price 
too far. Articles, whose use may easily be dispensed with 
without much loss of pleasure, will disappear from the market 
on a sHght increase of price; but indispensable goods, such as 
the breadstuffs, will bear any increase of price up to the full 
purchasing ability of the consumers. During the civil war, the 
sale of books was said to have largely diminished; but the sale 
of newspapers increased, as tidings from kindred in the army 
were felt to be a necessity. During the siege of Paris, by 
Henry IV., the price of wheat rose to fifty times its ordinary 
value. 

In the case of excess of supply, the prices of luxuries will 
fall, other things being equal, faster and farther than those of 
necessaries. 

The cost of production, including all expenses of manufact- 
ure, preservation, and transportation, may be regarded as the 
lowest Hmit of natural value. Necessaries will easily be forced 
down in price, below this limit, by overproduction ; but many 
of the so-called luxuries frequently fall below it by changes in 
fashion. Auctions and other forced sales of such commodities 
are common. The durability of goods, and the probabilities of 
future demands or supplies, will, of course, modify the result 
in each class of goods. 

Articles of secondary or indirect utility, such as tools, ma- 
chines, seed, and laboring animals, used in the production of 
goods of primary and direct utility, must usually be reckoned 



88 POLITICAL ECONOMY. 

as necessaries, in the case of diminishing supply; but as luxu- 
ries in case of excess. A soldier or hunter will sacrifice his 
clothing, and often his food, rather' than part with his gun ; 
but the extra gun is easily thrown away, or sold for a trifle, 
when he is on march. Governments, very properly, guard the 
implements of labor from being seized for ordinary debts. 

8i. The laws defended. — The formulas of supply and de- 
mand have sometimes been ridiculed by a certain class of econ- 
omists; while they have been denounced, by socaHsts and com- 
munists, as unnatural, iniquitous, and fit only to be abolished. 
But, as we have seen, these laws are nothing but the enlarge- 
ment of the facts found in every act of exchange of values. 

Properly understood, the laws of supply and demand are as 
valid and as uniform as any of the laws of nature. They are 
not to be discredited by seeming exceptions, nor by the modi- 
fications in results produced by other forces or environments. 

These laws must forever remain the chief guides for practical 
men in the prosecution of wealth-creating or wealth-distributing 
business. But here, as elsewhere, such men must learn to 
judge between the real and the false, and, amid the complex, 
to discriminate the essential from the accidental. In the appli- 
cations of all sciences, such sound judgment and practical skill 
must be employed, and this is accepted, by all fair reasoners, 
as an essential condition of the problems under these sciences. 
Science is light ; but it requires good eye-sight to use it for the 
best. 

The discussion of this subject might properly enough have 
been deferred to another branch of the science — that of ex- 
change — with which it has a close connection; but it seemed 
better to keep it in its place as a part of the field and phe- 
nomena of wants. 



CHAPTER VIII. 



WORK. 



82. The work segment. — We pass now to another seg. 
ment of our economic circle. The good Saxon word Work 
will serve us better than the 
Latin labor to cover that great 
middle ground of economic 
science which lies between 
Wants and Wealth. Even in 
common speech the word work 
is wider in meaning than the 
word labor. Men apply it to 
all voluntary efforts of mind or 
body — of individuals or soci- 
ety — to promote useful or ben- 
eficient ends; and it covers all production, from the humblest 
work of man to the mightiest, divinest work of God. 

The term labor has a more restricted meaning. It is the 
effort put forth to effect some given change or to produce some 
given result. Men employ labor to accomplish their work. 

83. The segment defined. — As shown in Chapter I, work 
takes its motives and its direction from the wants of man. 
These set in motion the giant wheels of all our industries, and 
choose for them the rich and coveted objects of their efforts. 

So, also, as shown in the same chapter, work finds its des- 
tined end and completion in the wealth it creates. The mag- 
nificent industrial movement ripens and rounds up into the 

p. E.— 8. (89) 




90 



POLITICAL ECONOMY, 



equally magnificent result. In Chapter IV, we have seen that 
work furnishes the second essential element in value. The 
effort side of the triangle of value marks the presence of work. 
No article, however useful, can have true and full value till the 
hand of toil has touched it, or till the shadow of past or coming 
work has fallen upon it. 

84. Work explicated. — Work in its largest sense, the 
sense in which we use it in this chapter, includes the entire 
volume and variety of activities which fill the business world. 
Each man's trade, profession, or vocation is his work. Be it 
with brain or hand, on land or sea, in shop or field or store, 
with pen or plow, as master or as man, inventing, construct- 
ing, managing, serving, laboring, trading, or conserving, — all 
activity which aims to create, increase, or exchange values, to 
gratify desires or prevent pains, — all come under the great name 
work. 

As work is the wealth-producer, its discussion will necessarily 
cover that field in economic science known in most of the 
books as production. The following synoptic view will exhibit 
something of the extent and distribution of this field : 



WORK. ■ 



Its field. 



Its factors. 



[ts forms. 



Material changes. 
Exchanges. 
Mental effects. 
Services. 

Nature 



Labor. 



r In sul 
\ In for 
*- In pis 



In substance, 
form, 
lace. 




crude, products. 
J Vital — human, animal. 
*- Non-vital — physical, chemic. 



soil — site. 



See full synopsis in Chapter X. 



,. • 1 f Nature.) ^ . ^, ,^,t,t 

Capital, i _ ( See synopsis, Chapter XV 11. 

L *■ Forms. ) 



Agricultural. 

Mining, etc. 

Manufacturing. 

Trade and transportation. 

Intellectual professions and pursuits. 



See synopsis in 

Chapter XVIII. 



wo/^Jir. 91 

85. The field of work. — Man's work lies with the world. 
In his business of wealth-making, or in that broader business 
of maintaining life, increasing happiness, and elevating his con- 
dition, he finds before him nothing but the naked planet on 
which he lives, and his own physical and intellectual powers. 
The entire field and problem of his work must be found in 
these. He can not go outside of these ; he can import nothing 
from other realms. 

If, now, the question be put. What can his work do ? the re- 
sponse comes, simple and plain, it can do four things, no more : 
I. It can change material things, change them in substance or 
mixture, in form and in place. 2. It can exchange its prod- 
ucts with other workers. 3. It can produce mental effects, — 
ideas, arts, sciences, civilization. 4. It can render services di- 
rectly to mankind. These four include all trades, professions, 
and employments; all the innumerable forms of man's work; 
all the ceaseless activities of the business world. 

86. Substance-changing work. — The changes in mate- 
rial things, effected by work, constitute the field of the proper 
productive industries. The change in substance, or, more 
properly, in the mixture or composition of substances, gives us : 

I. Agriculture, which, by the aid of natural forces, changes 
soil and its adjuncts to vegetables, and these again to animal 
substance. In economics, agriculture is understood to include 
all those industries which simply collect nature's growths, with- 
out first cultivating them. Thus, lumbering, hunting, and fish- 
ing may be counted as branches of agriculture, though the 
lumberman simply takes the trees from the wild forests; the 
hunter collects the meats, skins, feathers, furs, and ivories of 
animals which grew without his care, in their native haunts; 
and the fishermen fetch from the lakes, rivers, and seas, the fish 
which cost them only the labor of catching. At its outset all 
agriculture gathered nature's spontaneous products. 

Agriculture, it is evident, deals with the life-forces of nature 
and their products. It takes nature at its highest and best, and 



92 POLITICAL ECONOMY. 

finds for man the nearly ready supply of his first and simplest 
wants. 

2. The substance-changing industries include mining and the 
metallurgic arts which dig the ores and extract the metals, or 
bring us the coal from its native beds. 

3. They include, also, the chemical manufactures, as those 
of oils, paints, drugs, artificial condiments, perfumes, and all 
the various preparations of animal and vegetable substances for 
the arts or appetites of men. Many of these approach, in their 
economic characters and conditions, the ordinary manufactures. 

87. Form-changing work. — The changes in material 
forms occupy what may be called the mechanic manufactures. 
Their aim is not like that of agriculture, to collect utiHties 
already produced by nature, but, out of crude and otherwise 
useless materials, to shape new utilities, devised by the thought 
of man, so that the iron becomes a ship, the tree a table, and 
the stone a' house. They include the great staple industries of 
all nations and all times, — the house-building, the cloth-making, 
and the tool-making arts, in all their wide variety of products, 
from the hut to the palace, from the sackcloth to the finest 
lace, and from the simplest lever to the watch-making machin- 
ery, the eighty-ton steam hammer, and the dividing machine 
which graduates the meridian circle to a fineness that demands 
the microscope to discern its marks. 

They comprise, also, the almost innumerable fabrications in 
which the brute matter and dumb forces of nature are trans- 
formed into a great army of silent and obedient slaves and 
helpers to mankind, to draw his vehicles, carry his messages, 
do his drudgery, fight his battles, increase his powers, multiply 
his wealth, and give him wider dominion over the land and 
over the sea. 

In these arts, nature is taken at its lowest — its unorganized 
matter — and man at his best, putting his thought and will into 
crude matter, and making it to assume shapes and to yield 
utilities which nature never dreamt of 



WORK. 93' 

88. Place-changing work. — The change in place is the 
work of transportation. Its necessity comes from the desire of 
men to collect and enjoy, at their homes, the varied products 
of distant lands and of differing climes. Sitting under his own 
vine and fig-tree, man would eat the fruits of the tropics, clothe 
himself with the furs of the arctics, the Hnen of Ireland, the 
silks of France, and the soft wools of Saxony or Cashmere. 
On his breakfast table, he wishes the coffee of Arabia, the tea 
from China, the sugar of the West Indies, and the spices of the 
East— fruits, fish, flesh, and bread, each from a different and 
perhaps distant locality. To get these, the long lines of trans- 
portation must be worked — ships must sail, caravans must 
travel, rail-cars run; and great store-houses must receive, pre- 
serve, and distribute the surplus products of each and every 
land. 

Transportation, as an industry, is usually united with that of 
trade or exchange, but it has its own arts, laws, and condi- 
tions, which the economist must study. It creates values as 
truly as the other arts, though it adds not a single bushel to the 
wheat it carries, nor works a single change in the form of the 
goods it distributes. It does not deal with nature directly, low 
or high, as do the great industries of the field and the shop, 
except as it employs her forces to waft its ships and drag its 
trains. It might appropriately be called the service-industry, 
since its mission is to run our errands, carry our packages to 
our neighbors, and bring back theirs to us. 

8g. Exchange. — We have considered the first of the four 
great fields open to man's work- — the field in which man meets 
nature, and exerts his powers to effect useful changes in her 
materials and products. In the second field, that of exchange, 
to which we now come, man meets man. He comes as the 
owner of wealth, which he does not need for his personal grat- 
ification, to exchange it for the surplus goods of another. Ex- 
change, seemingly so simple and unimportant, forms one of the 
widest and most difficult fields of Political Economy. Constitut- 



94 POLITICAL ECONOMY. 

ing one of the most striking differences which distinguish men 
from brutes, it lies at the basis of human civihzation, if not of 
man's power to stay permanently upon the earth. The right to 
exchange hangs upon the right to possess, and gives to that 
right its chief importance. Wealth is possible, and worth hav- 
ing, only through this power to exchange it for all objects of 
desire. The wider discussion of tTiis field must be left for 
coming chapters. 

go. Intellectual work. — The third field of work takes us 
out of the domain of material goods into the sphere of man's in- 
tellectual life and powers. Human efforts do not expend them- 
selves wholly upon the outer world; there is a world within, a 
world of ideas, in which man is also a worker. There are in- 
dustries of the intellect just as onerous and as important as 
those of the physical powers. Indeed, all proper industry be- 
gins with a mental movement; and the physical effort only 
gives form and effect to what the mind had already shaped in 
idea. Some knowledge of nature's laws must precede the 
mastery of her forces and the proper use of her materials. 

There has been a question whether intellectual forces are 
economic factors, and whether intellectual products are eco- 
nomic goods; but there can be no question as to the part that 
these intellectual powers and products play in the world of the 
industries. The scientific investigator and explorer sometimes 
discovers facts which revolutionize industry and lend to it a 
productiveness manifold greater than that which it had previ- 
ously possessed. The discoverer of the magnet made modern 
commerce possible. The studies of Galvani and his successors 
have given to us the telegraph and telephone, electro-plating, 
electrotype, and the powerful and fast-prevailing electric light. 
They bid fair to give us, ere long, a motor force which shall 
surpass all others, and lift us to achievements heretofore 
impossible. 

The inventor who is also an intellectual worker, turns the 
work of the investigator to account, and harnesses the new 



WORK. 95 

found fact or force to its task in the arts. The great patent 
offices of Europe and America are full of their work; and gov- 
ernments, by their letters-patent, recognize the property value 
of their ideas. 

Authors, scholars, orators, teachers, lawyers, poets, preach- 
ers, artists, and statesmen, all belong to the guilds of intellect- 
ual workers, and all have their place in the world of work. 
All are counted worthy of wages by their fellow-men, and their 
wages are relatively large. 

-The number of intellectual workers always increases as civil- 
ization advances; and one of the plainest results of our modern 
improvements in the arts, is the release of men, more and 
more, from merely physical toil and drudgery, and their eleva- 
tion to the position of brain-workers. Arms of iron and fingers 
of steel now do the hardest of the work, while the human 
laborer furnishes the eyes to watch the processes, and the hand 
to arrange the task and summon the power. 

91. Service work. — In the fourth and final field of work, 
we find the worker ministering directly to the gratification of 
his employer. This ministration we call service. The worker 
in this field fabricates no goods, offers no exchanges, aims at no 
mere intellectual effects. He simply meets, by some act, an- 
other's wants. He who brushes our clothes, or brings our din- 
ner, drives our carriage, or watches by our bedside when we 
are sick, does us a valuable service, and we recognize its value 
by giving value in exchange. For there are intellectual as well 
as physical services. The lawyer, the teacher, the singer^ and 
many other professional and artist classes, render services, 
either personal or public. 

The chief criterion of service is that it yields gratification 
without producing valuable goods. It does for us directly what 
the goods are designed to do — meets our wants or desires. But 
this test is not of universal appfication. Many services are a 
part of the necessary labor of production. Thus, the cook who 
prepares our dinner adds to the value of the food as much as 



g6 POLITICAL ECONOMY. 

the miller who grinds the wheat into flour. Service employs no 
small part of the working forces of the world. Myriads of 
services are rendered gratuitously, by friend to friend, by kin- 
dred and neighbors, and even by strangers. They may all be 
counted as contributions to the common good, if not to wealth, 
in so far as they save goods, conserve force, and advance well- 
being. 

We have thus glanced at the great subdivisions of that field 
in which the working power of the world finds its daily employ- 
ment. This survey will help us to study, with more clearness, 
the factors, or agencies, and instruments by which man effects 
his purposes. It is not needful to anticipate here the discussion 
of these factors, each of which will demand its separate chapter 
or chapters. 

In the examination of the chief forms of industry, each of 
which will also ask its own chapter, we shall revisit, from a new 
line of approach, and see under a different light the fields here 
explained. 



CHAPTER IX. 



THE GIFTS OF NATURE. 



92. General view. — We come now to the factors which 
necessarily enter into all of man's work. They are these three: 
I. The gifts of nature; 2. Labor; 3. Capital. 

Before acquiring any thing of his own, man must take from 
existing things around him. His work presupposes matter and 
its laws. 

Nature, or the world of matter and force, presents to man. 
kind and their industries, an endless variety of substance, 
forms, and forces. To measure properly the economic charac- 
ter and influence of these, they must be divided into their 
proper classes. The following diagram will bring these classes 
under the eye at once : 



Matter. 



Forces. 



Crude materials. 



Vital, 



Land 



...{ 



Animal. 
Organic products. \ Vegetable. 
Mineral. 
Metals I Useful : iron, tin, copper, etc. 

I Precious : gold, silver. 
Other minerals— stone, earths, clay, lime. 
Organic matter — wood, cotton, wool, bone, silk, 
etc. 
l. Air and water. 
Human strength. 
Animal strength. 
Forces of growth. 

r Gravitation and cohesion. 
Sunlight and heat. 
Wind-power. 
Water-power. 
Electricity and galvanism. 
Magnetism. 
Chemical aifinities. 
Heat and combustion. 



. Non-vital. 



Molar. 



- Molecular. 



As soil. 
As site. 



P. E.— 9. 



(97) 



98 POLITICAL ECONOMY. 

* This classification is economic, not scientific. In a scientific 
classification, water-power is a form of gravitation, and wind 
and steam are results of heat. The division lines in science are 
never fixed and impassible. Class melts into class by insensible 
gradations. 

93. Nature's gifts control industry. — These so-called 
gifts of nature, though without any proper value, have often 
the highest utility, and are among the most important economic 
facts and forces. They furnish the solid basis of all values, and 
their abundance or scarcity in any region, potentially affects 
and controls the industries of that region. 

In tropical climates, the gifts of nature so nearly meet the 
common wants of man as to seriously discourage industry. 
The spontaneous growths of edible fruits and vegetables pro- 
vide the indolent natives with food ; the warm air renders cloth- 
ing nearly useless except for decency, and the shade of the 
trees shelters from the sunshine. Except to guard against the 
attacks of wild beasts, and to protect from the occasional 
storms, houses would be needless, and the simplest inclosure, 
with roof of boughs or bark, serves as domicile and home. 
Store-houses and barns are unknown. When commerce tempts 
them with its offers of useful exchanges, the labor is often lim- 
ited to a more abundant gathering of the spontaneous products 
of their prolific soil and clime. 

In the arctic regions, on the contrary, nature is so chary of its 
higher gifts, that the laboring power of the inhabitants is mostly 
exhausted in the ' toil of procuring the merest necessaries of life. 
If the desire is ever awakened to engage in higher and more 
productive arts, the rigors of the cHmate, and the absence of 
favoring conditions, would make them powerless against the 
rivalries of more temperate and propitious climes. The fields 
of ice and snow offer poor soil for seed-sowing, and the scant 
sunshine of the brief summer could ripen only the hardiest 
plants. The darkness and cold of the arctic winter would 
compel a suspension of most manufactures, and commerce 



THE GIFTS OF NATURE. 99 

would find In the dog-sleds but a poor substitute for the rail- 
roads and canals, snow-bound and ice-bound through so many 
months. 

The temperate regions are the natural homes of the industrial 
arts. Here the impulse to work is strongest, and the oppor- 
tunities are most favoring. Earth and sky conspire to stimulate 
and aid the work-spirit in mankind. Nature refuses him food 
without labor; but she responds so liberally to his efforts that 
the surplus invites him to traffic, or affords him support and 
leisure for all his arts. 

It is obvious that the practical problems of economics will 
vary in the different zones almost as much as the zones them- 
selves differ. Both man and his work change as they cross the 
lines of latitude. 

94. How nature helps arts. — The presence or absence 
of minerals and other materials, of food supplies, of coal for the 
generation of steam- and of water-power, also give direction, 
and put limitations, to human industry. Enghsh statesmen and 
economists have already begun to express fears for the future 
of their island, in view of the rapid consumption of their coal 
supplies. But the influence of these circumstances has largely 
diminished since the railroad, the steamship, and the telegraph 
have so far overcome the barriers of time and distance; and 
electricity or other new motors may relieve their fears long 
ere the coal-beds have been exhausted. 

A careful study of the history of human industries and arts, 
would doubtless show that the forms and the processes of nat- 
ure have frequently, if not usually, furnished man the hints 
for his inventions. The mechanism of his own body has taught 
him the devices for a hundred machines, and his agriculture is 
but a late imitation of nature's planting and sowing. The com-, 
ing arts and industries of mankind will doubtless be still more 
indebted to nature's gifts. Since modern science began in 
earnest, the closer and more comprehensive study of nature, 
the arts have made strides hitherto unprecedented in their 



lOO POLITICAL ECONOMY. 

history; and the new victories have been won just where the 
facts of nature have come most to be understood. 

95. Unappropriated gifts. — There is a class of nature's 
gifts which are too abundant to be appropriated, and which can 
never, under ordinary circumstances, have any value in the 
markets. Such are the atrnosphere, the light and heat of the 
sun, gravitation, climate, the rain and snow, the rivers and 
seas, and, in most cases, potable water. All these have high 
utility, and are indispensable to mankind. Yet they are no 
man's property, and are bought and sold in no market; except 
in the case of water in time of drought, and in the great cities. 
But, like all other gifts of nature, these can not be utilized in 
the arts, except under conditions which cost effort and have 
value. The wind is free, but we must have sails if we will 
have it waft our ships. 

We have already noted how climates, including the elements 
of the light and heat of the sun, influence the industrial pur- 
suits of whole populations. But there are other important eco- 
nomic influences and relations of these great natural agencies 
which can not be omitted in the broadest view of Political 
Economy. From the moment that man places himself over 
against the world of matter, to subdue and use it, from that 
moment every aspect and agency of nature comes to have an 
economic bearing. The Gulf Stream has played, and still 
plays, as important a part in the Political Economy of England 
as do the coal-beds hidden under her soil. The coast lines of 
Europe have determined the commerce of Europe, and this in 
turn has influenced European production and wealth. 

Climate, soil, food, and water influence the health of a popu- 
lation, and health reacts on their industries. 

Dr. Roscher has collected many interesting facts which illus- 
trate the influence of external nature, the sea and the climate, 
on the courses and success of the industries of different peo- 
ples. Owing to the great oceanic currents, "England is nearer 
to almost all the important mercantile coasts of the world, by 



THE GIFTS OF NATURE. joi 

three hundred geographical miles, than the eastern states of the 
American union." 

"The more remote a country is from the equator, the more 
is its fertility confined to its lowest parts. Greater heat will, as 
a rule, ripen the same product sooner, and thus permit the 
same land to be used several times in a year." "In central 
Germany, even a second crop can be produced after the corn 
harvest. In Arabia, the same seed produces three harvests, be- 
cause the grain which falls at the time of harvesting germinates 
immediately, and suffices for new seed." 

g6. Natural products. — In this class of nature's gifts are 
included all those which are ready, without change, or with 
such slight changes as do not destroy their character, to satisfy 
human wants. Thus, the edible plants, fruits, grains, and 
roots, with or without cooking, give man food. The forests 
and coal-beds give him fuel with no change but that of cutting 
or digging. The animals to carry him, or give him their flesh, 
milk, and eggs to feed him. The mineral world gives him salt 
for his viands, water for his thirst, and air for his breath. In 
all these cases, the utihty is given by nature ; man's art does 
nothing but collect and appropriate the products of nature's 
own labor; or if, as in agriculture, man also labors, it is with 
nature, and as her assistant. The lower animals, without art or 
labor, share with man in many of these gifts. 

If all of nature's gifts had been of this class, or if she had in 
this manner provided for all the wants of man, then human in- 
dustry might never have existed, and economic science would 
have had no field. Arts would have been as needless to man 
as they are to the animal tribes. As we have seen, even the 
abundance of these products, in the tropical regions, leaves 
mankind with little occasion, and with still less disposition, to 
labor. 

It is obvious that as these products of nature's organic forces 
require less of man's labor to fit them for his use, so also they 
afford less scope for man's arts than do the crude forms of 



I02 POLITICAL ECONOMY. 

matter. We shall find this an important economic fact in 
judging the value of the different forms of labor. 

These products appeal to the vital wants of man, incessant, 
pressing, immediate, but chiefly animal and sensuous. They 
are thus the more useful, but the less valuable, portion of man's 
wealth. In time of great need, all other wealth will be readily 
given for these food products; but in times of ordinary abun- 
dance men give dollars for manufactured goods where they give 
only a few cents for bread and meat. 

97. Crude materials. — Most of the substances met in 
nature have no immediate use for man. They feed no appe- 
tite, gratify no desire ; they simply help to make up the world. 
But to human art they are the materials for its work, and it 
gives to this crude matter shapes which make it highly useful. 
Many animal and vegetable substances, such as wool, silk, 
hides, bones, shell, wood, cotton, flax, are included in this 
class of substances, because they are employed as materials and 
not as products useful in themselves. They are substances out 
of which art may manufacture its useful goods. The utility is 
chiefly in the form of construction of such goods, and not in 
their materials. To the worthless, man gives the highest values 
known in the markets. 

Out of the metals, in themselves useless and inconvenient, 
work brings the myriad articles of use and beauty which fill 
our houses with convenience and comfort, our mills with pow- 
erful machinery, our roads with vehicles, our shops and fields 
with tools, and cover our rivers and seas with ships and swift- 
sailing steamers. Out of the wood, fit, as nature gives it, only 
for fuel, art constructs our houses, our furniture, and a host of 
utihties to help human Hfe in its conflicts for existence, happi- 
ness, and progress. And so through the entire range of crude 
matter, nature gives things in themselves worthless; but work 
changes them into goods of highest use, and into treasures of 
countless wealth. 

Here in this field of brute matter, art wins its greatest tri- 



THE GIFTS OF NATURE. 103 

umphs and gains its richest rewards. Out of this comes the 
largest part of the world's riches, and here economic science 
finds some of its most difficult problems. 

98. Products of nature and art contrasted. — A look 
through the great marts of trade will tell us that nature's prod- 
ucts fill but a small space there, and that manufactured goods — 
goods for which nature furnished material only, and labor gave 
valuable forms — fill the great ware-houses. Most of the per- 
manent wealth of the world belongs to this class. The houses 
dotting the farms and walling in the streets of the great cities; 
the cultivated lands, won from weeds and wildness by years 
of skillful tillage; the roads, railroads, and paved streets; the 
great mills and their costly machinery; the innumerable wares, 
woven, forged, cast, wrought, pressed, printed, or shaped by 
hands of men or hands of iron ; the beautiful works of higher 
art, — these fill the endless pages of the inventories of wealth." 

The products of nature are fitted mostly to gratify the lower, 
animal wants of mankind. Manufactured . goods are, in gen- 
eral, intended for higher gratifications. Nature satisfies the 
brute and the savage; but art labors to afford joy and satisfac- 
tion to the children of civilization. 

The forms and properties of nature's products are nearly 
fixed. They may be enlarged, improved, and multiplied by 
the skill of man, but the natural type remains visible through 
all changes. The goods wrought by art, from nature's crude 
materials, have an endless variety, and fresh novelties are 
added almost daily to the list. Hence, the production may go 
on endlessly since it may perpetually choose new forms and 
objects — new desires to gratify and new gratifications for the 
old. 

99. Natural forces. — The forces of nature stand next in 
the catalogue of her gifts. All work — all changes in matter — 
imply force as their efficient agent. Physical changes presup- 
pose physical forces, and these must come from nature. Of 
nature's forces we know htde. They are the unknown causes 



I04 POLITICAL ECONOMY, 

of known and visible effects. Whether they are all distinct and 
different, or are merely the differing forms of a common en- 
ergy, it is of little use to inquire. As economic facts, these 
forces differ in rank and worth. 

Force is never an absolutely free gift of nature. Human 
strength must be nourished and educated before it is useful; 
animals must be tamed, trained, fed, and cared for; and the 
non-vital forces must be fitted with the proper machinery before 
they can be made to do useful work. 

First in the rank of forces stand the vital, and first among the 
vital stand the human, and first among the human stand the 
mental or brain forces, if we may separate the brain power from 
the bodily forces. 

lOO. Human strength. — The mental, or rather the brain 
and nerve force, stands most nearly connected with the mind 
which controls all by its intelligence. It is not necessary to 
discuss here the real relations of mind and matter. Taking the 
mind or intelligence as a palpable and admitted fact, we may 
confine our view to the physical side of being. On this side, 
man's power, or strength, rather, is a gift of nature as much as 
is that of the animals which serve him. Man, it is true, is 
reared for his manhood, not simply for his labor. The wants 
of childhood are as much the ultimate end and use of wealth 
as those of manhood. But, as an economic force, we must take 
account of the cost and productiveness of human strength as 
we would of any other agent used in our work. The proper 
and full showing of this cost belongs to another chapter — that 
on labor. 

Whatever the aids man may summon by his arts, from nat- 
ural forces and mechanical devices, human strength can never 
be dispensed with in the field of the industries. Above the 
machine always stands the man. Even the business of super- 
vision — the work of eyes and brain — demands a certain outlay 
of physical energy. The hand of the machinist comes before 
the machine which he constructs; and the hand of the engi- 



THE GIFTS OF NATURE. 1 05 

neer, or other attendant, must remain upon the machine till its 
work is done. As to fact, the wide introduction of so-called 
labor-saving machinery, in modern times, has greatly increased 
the demand for human labor, in place of diminishing it. It has 
simply transferred the man to another, and generally to a 
higher, sphere of work. 

loi. Animal strength. — The strength of the domesticated 
animals — the first force which man learned to employ next his 
own — has also been crowded out of its old places in the indus- 
tries. Water, wind, and steam have shown themselver cheaper, 
mightier, and more manageable servants than the ox and the 
horse. But, like their masters and drivers, these animals have 
found themselves not dismissed from labor, but only transferred 
to new fields. It was thought that the railroads, which dis- 
placed the old stage coaches, would also render thousands of 
horses useless; but the result shows that the demand for horses 
was increased. New routes were found for many of the 
coaches, and a multitude of cars and carts came into demand 
to transport people and packages to and from the railway sta- 
tions. Agriculture and other industries also took on immense 
growths, making new requisitions for the draft animals; and 
hence the animal forces, instead of disappearing from our in- 
dustries, hold now, among these industries, a larger place than 
ever. 

102. Forces of growth. — The silent, vital forces employed 
by nature to build up her forests and to clothe her fields with 
vegetation, as also those which work out the tissues and organs 
of animal life, are implied and embraced in the organic gifts 
which they create. 

In the great agricultural industries, the forces of plant-growth 
have for ages been the chief reliance of the grain-raisers and 
the forest and fruit-growers. To stimulate these forces by cul- 
tivation, to nourish them by fertilizers, to direct them by selec- 
tions of seed and soil, by grafting and pruning, — these make up 
much of agricultural art. 



Io6 POLITICAL ECONOMY. 

But with the advance of biological science, and in the farm- 
er's and stock-breeder's art, these forces are coming to be 
counted on and employed as the mechanician counts on and 
employs, the energies of steam and electricity. Thus they are 
now to be reckoned among the costly and controllable eco- 
nomic forces, to be taken into account in the computations of 
values. 

103. Economic production a problem of force. — In 
the final analysis, all economic questions, in the production and 
consumption of wealth, reduce to the question of the economy 
and Conservation of energies — the silent energies of nature 
above all others. The productive power of the soil, the work- 
ing power of the domestic animals, and the steam or electric 
power generated by the consumption of costly fuels, all alike 
belong to these silent molecular energies. The foods or other 
gratifications which they produce, are only stored-up energy, 
ready to be transformed, in turn, to the finer energies of human 
life and happiness. 

104. Non-vital forces. — The non-vital or inanimate forces 
of nature can only be employed through machinery costing 
great skill in its invention, construction, and management. 
But, when thus harnessed and controlled, these forces work with 
a tireless power and steadiness which defy the competition of 
human energies. The most conspicuous feature of the indus- 
trial progress of this century, is the rapid multiplication and 
perfection of power-machinery of all sorts. Its triumphs are 
still extending: i. In the variety of purposes to which it is ap- 
plied, leaving no field of industry uninvaded; 2. In the perfec- 
tion and abundance of its work, surpassing skilled labor in 
some of its very strongholds, such as watch-making and bank- 
note engraving, and so abundantly that a watch may now be 
had for five dollars, and even less; and, 3. In man's increas- 
ing mastery over these forces, enabling him to cheapen the use 
of the older forces of wind and water, and to introduce new 
forces, as in the heat engine and the electric motors. 



THE GIFTS OF NATURE, 107 

It was estimated, in 1876, that the steam-power then in use 
throughout the world, amounted to fifteen million horse-power; 
and that, if worked continuously, it would do the work of sixty 
million horses. Stephenson's first railroad locomotive, built in 
1 8 14, could run six miles an hour. Locomotives have lately 
drawn trains ninety miles the hour. The Rocket, the first 
locomotive of the first regular railroad, the Liverpool and Man- 
chester Railway, weighed four and one-fourth tons. Loco- 
motives are now made which weigh nearly one hundred tons. 

The non-vital forces which nature offers for the service of 
man are usually divided into the molar forces, or those which 
affect masses of matter and produce sensible movements, and 
the molecular, or those which act upon the molecules of matter 
and produce motions inappreciable by the senses. In their 
origin all known forces are molecular, the largest motions 
growing out of the minute and insensible. 

The molar forces, embracing the power of moving winds, of 
falling waters, the down-pulling weight, and the coiled spring, 
early attracted attention, and were utilized in the arts. Their 
sensible character made it easy to invent the sails, the water- 
wheel, and the pulley, which served to harness them to their 
work. But their utility was limited to times and conditions 
which prevented their general employment. 

The molecular forces of electricity, magnetism, chemical 
affinities, and, above all, the steam-generating heat, have come 
forth only at the bidding of science, but their omnipotence and 
their independence of favoring times and localities have given 
them a sudden acceptance and a universal employment. 

105. The land gift. — Land, as a gift of nature and a factor 
in the world's work, might seem properly to belong partly to 
the class of crude matter and partly to the non-vital forces 
which alone make the soil productive. But the land problems 
hold so important a place in PoHtical Economy as to ask separ- 
ate treatment. 

Land, as an economic fact, is both important and peculiar. 



Io8 POLITICAL ECONOMY. 

As constituting the habitable part of the globe, all human life 
must have a part in its occupation. As the theater of all estab- 
lished industrial operations, it is a prime necessity to such op- 
erations. As the source of nearly all the food supplies, and 
thus of man's continued stay in life, its cultivation fills the first 
place among human employments. As a form of permanent 
investment of wealth, its security and other advantages are so 
unique and superior as to claim for it a still higher considera- 
tion. And, finally, its connections as territory, with social and 
national life and power, force it perpetually to the front in all 
great political interests and questions. The piecuharity and im- 
portance of its economic character are attested by the space 
given to its discussion among the economists, and by the 
diversity of views presented in their discussions. 

io6. Land as soil. — Land as soil is useful in proportion to 
its productiveness, and its nearness to markets. 

Its productiveness depends: (i.) Upon its composition and 
that of the subsoil; (2.) Upon the climate in which it lies; 
(3.) Upon its elevation, slope, and exposure; (4.) Upon the 
irrigation and drainage required and possible to it; (5.) Upon 
the fertilization needed or applicable to it; (6.) Upon the crops 
to which it is adapted; (7.) Upon the kind and amount of cul- 
tivation to be employed. The character, amount, and value 
of the crops will depend, in part, upon all of these. The dis- 
cussion of the extent of the influence of these several circum- 
stances would occupy more space than can be given in this 
chapter. 

The nearness to markets affects the value of land because of 
the time and labor required to get its crops to the place of sale. 
Many of the coarser products are so great in bulk in proportion 
to their value, that they will not pay for long transportation. 
There is a distance at which the cost of carrying a ton of hay 
will equal the value of the hay itself. In this case, the farmer 
will simply be paid for his labor of transportation, and not at 
all for his hay. All less distances will evidently consume 



THE GIFTS OF NATURE. 109 

some part of the price of the hay in the cost of carrying. Pota- 
toes can usually be carried farther than hay without using up 
the value in transportation; Indian corn farther than potatoes; 
wheat farther than corn; animals farther than grain; and dairy 
products farther than animals. Tea, coffee, and spices will 
bear longer transportation than ordinary food products. Thus, 
all transportation may be regarded as a direct charge or tax 
upon the land, and must be deducted from its value. 

The adaptation of the products to the market, and the com- 
petition to be met in such market, must also be taken into the 
economic account. So, also, must we take account of the re- 
turn supplies to be obtained from the market, since these too 
cost something for transportation. 

In this discussion of the nature of land values, no mention 
has been made of mineral products found in the earth. If the 
land covers a gold mine, or mines of iron or other metals, it 
has an independent value, and high in proportion to the rich- 
ness and accessibility of its ores. So, also, coal-beds beneath 
the surface, or forests standing upon it, give each a distinct in- 
crement of value. But the value of mines must be considered 
as something distinct from the value of soil. If the land is 
taken into consideration at all in mining, it is simply as includ- 
ing the right to the mines, or as a site for the above-ground 
works connected with the mine. 

107. Land as site. — Land as a site is useful for the space 
and support it affords for the property or works to be placed 
upon it. For this purpose it matters little whether it consists 
of richest mold, of rocks, or of barren sand ; what is wanted is 
space and situation. For these purposes the values are some- 
times enormous. In great cities, plots of ground, fronting upon 
business streets, have been sold for four thousand dollars 
for each foot of frontage. Residence lots on fashionable streets 
also bring incredible prices. 

Land as a site varies in value with the presence or absence 
of adjacent population; with the proximity to roads, rivers, 



no POLITICAL ECONOMY. 

harbors, cities, markets, and other civic or economic institu- 
tions ; and, finally, with its adaptations to the uses for which it 
is desired, as a place of abode or of business. 

1 08. Land values also include effort. — In this discus- 
sion of the value of lands, it is to be understood that the value 
meant is a possible rather than an actual value. Land and 
mines offer no real exception to the doctrine of value, hereto- 
fore given, as requiring effort as one of its essential elements. 
Neither lands nor mines, as they lie in nature, have any true 
value. The value is given to them by the work which affects 
their situation or surroundings. Just as surplus and therefore 
worthless products of one country become valuable by the work 
of transporting them to another — to the vicinity of those who 
need them — so land becomes valuable, not by transporting it to 
the people who will use it, but by transporting these people to 
or towards it. When we open new roads, or railroads, into 
unoccupied territory, we say we . are bringing its lands into 
market. We mean that we are bringing the market to the 
lands. Speculators buy the lands in anticipation .of their com- 
ing value. Let it be certain that no immigration will ever 
reach them, and the shadowy value reflected upon them, in 
anticipation of their coming value, will fade out at once. 

When the immigrants come, and begin their work of im- 
provement, every road they make and every house they build, 
reflects something of possible value upon the wild lands near 
them ; for, as we have seen, soil has two elements of value — 
its productiveness and its nearness to markets. 

So, also, mines are counted valuable in anticipation of the 
values to be given to them by the workers to come. These 
prospective values are not uncommon in other spheres. The 
surplus wheat of this year has a value in view of the probable 
wants of the year to come. 

But neither in lands or mines is the value so large as specu- 
lation represents it. In strict truth, it is found, in the long run, 
that metals are worth what it costs to mine and smelt them 3 



THE GIFTS OF NATURE. Ill 

and lands, after they are fully improved, can nearly always be 
bought for what the improvements cost, often for less. 

The illusion which exists in regard to land, mines, and other 
gifts of nature (for it is an illusion to count them as valuable in 
their natural state*), comes from the failure to discriminate be- 
tween utility and value. Where there is evident utility, men 
readily conclude there must be value. The Scotch farmer, 
who found some garnets and other precious stones among the 
rocks on his land, thought himself wealthy, and might have 
sold a part of his new-found riches to his neighbors, if he could 
have persuaded them to beheve in the value of his findings ; 
but when he had gathered and carried a quantity of the gar- 
nets to the London lapidary, he was disgusted to learn that till 
the lapidary had expended his labor upon them, they would not 
pay him for the trouble of getting them to market. His belief 
that they were valuable in their native state did not make them 
so. Men must learn that there is no wealth without labor. 
What nature gives can be made valuable only by labor upon 
or around it. It must be changed by human toil, in substance, 
in form, or in relative position. 



*"Bastiat asserted, strongly and clearly, that no mere product of nat- 
ure (land, of course, included) possesses value. Roscher partly contra- 
dicts this, and instances mineral veins and coal-fields which immediately, 
on discovery, he says, "acquire great exchangeable value." But suppose 
the coal-field to be discovered in an uninhabited land, remote and difti- 
cult of access. Its supposed value would diminish with the distance, till 
it finally disappeared. It evidently owes much, if not all, of its value to 
location and surroundings; just as in the case of a city lot. The sup- 
posed value is of that speculative and unreal character which is almost 
daily given to worthless stocks used in the gambling operations of stock 
exchanges. 



CHAPTER X. 



LABOR — STRENGTH. 



109. Synoptic view. — The following tabular presentation 
of topics will enable the reader and student to follow more 
easily the discussion : 



Factors. 



r Its nature and kinds. 

Strength \ Its source and cost. 

I Its substitutes. 

Its nature. 

Kinds — mental, sense, 

Cost — varieties. 

Substitutes. 



Skill 



manual. 



Tools and machines. 
Physical ] 



Classes 



Organization. - 



Productive. 

Services. 

Discovery and invention. 

Superintendence and management. 
I Professional services. 
Undistributed or solitary. 

Its nature. 

Its advantages. 

Its nature. 

Its advantages. 

Its disadvantages. 

Its limits. 
Health and bodily vigor. 
Liberty and public esteem. 
Intelligence. 
Good morals. 

Fair wages. Piece wages and time wages. 
I Self-employed labor. 
Distribution of labor to the employments. 



Intellectual. 



Division of trades. 



Division of labor. 



Conditions 



110. General aspects of labor. — We come now from the 

gratuitous to the costly factors in work. 

(112) 



LAB OR—S TRENG TH. 113 

In the great economic field of Work, labor stands central and 
conspicuous. To many careless eyes it seems the only real or 
needful presence there. Labor, all-conquering, wealth-produc- 
ing, appears to them the sole source of value — the true wealth 
creator. Its presence is so active and imposing that it seems to 
fill the whole field, and labor and work are taken as inter- 
changeable terms. 

As here used, labor includes all voluntary human efforts of 
strength or skill, to do service, or to produce valuable changes 
in matter. 

Economically, labor represents the difficulty in the way of 
the attainment of man's wishes. He sees a ripe fruit upon a 
high tree; it will cost a painful effort to obtain it. He weighs 
the pain of the effort against the pleasure to be derived from 
the fruit. He is offered a gold watch for one hundred dollars; 
it will cost the wages of a month or two of labor to earn the 
price. He measures the pain of this toil against the gratifica- 
tion to be gotten from the watch. He has reared a good 
horse for which one offers him two hundred dollars; he meas- 
ures the toil and care which his horse has already cost him 
against the labor it would require to get the money some 
other way. This is a simple, elementary view. It tells a 
part of the truth, but not all. There are other aspects of 
the subject. 

Labor is a productive effort. It is the application of energy 
to effect some change of place, form, or substance, which will 
not take place without such labor. Thus it is creative, giving 
existence to forms and qualities — utilities — which would else 
remain non-existent. 

The power to labor is the power to produce objects of de- 
sire, and therefore of value. He who labors is entitled to the 
fruits of his labor. They are his to enjoy or to sell. If he 
chooses to sell his laboring power to another, then the price 
of the labor is his, but the products belong to him who 
purchased the labor. 

p. E.-io. 



114 POLITICAL ECONOMY. 

111. Labor an economic battle-field. — Labor furnishes 
one of the great battle-fields of Political Economy. Its ques- 
tions are often distorted by animosities, or clouded by party 
spirit. Communism and socialism oftenest wage their warfare 
in the name and behalf of labor; and economists are summoned 
to use their sharpest insight to determine the exact rights of 
labor, and the conditions of its greatest efficiency and well- 
being. The reason of all this lies in the pregnant fact that 
laborers constitute the great mass of human society ; and 
they stand doubly related to others, as laborers confronted 
with capitahsts, and as the many poor contrasted with the 
few rich. 

These questions of the rights and well-being of laborers 
belong to social economy rather than to the science of wealth, 
and to that branch of our work we relegate them. In this 
chapter, labor will be considered in its purely economic as- 
pects, as an agent in the production of values. It is not, 
however, forgotten that the laborer's education, personal com- 
fort, and self-respect add to his working power and efficiency. 

112. The three factors of labor. — Every act of labor 
performed by man involves three factors : - 

1. The strength or force by which the motion is made; 

2. The skill or intelligence by which this motion is directed; 

3. The tool, implement, or machine by the aid of which the 
force is applied. In some cases the hand itself is the only tool 
employed. 

The strength and skill reside in the laborer. The tools 
employed may be regarded as supplements to his hands and 
fingers, which are his natural tools of labor. Tools and ma- 
chines are also to be considered as capital; but here they are 
studied as means of accomplishing labor. 

113. Economic rank of the factors. — These three factors 
are of different origin and costhness, and the values produced 
by labor will vary as one or another of them enters chiefly into 
the labor required. Products of labor requiring chiefly strength 



LAB OR—STRENG TH. 115 

will be cheaper than those of labor requiring skill as the prin- 
cipal factor. The consideration of the relative amount and 
kind of strength and skill required enters into all true estimates 
of values produced. The labor of children is low in price 
because of slight strength and skill. The laborer who can 
work with fine tools is worth more than one who uses only 
coarse and common tools. He whose tools are most costly 
and efficient is preferred to others. Some tools are simply aids 
to strength, as the lever, the wedge, and the pulley. Others 
are aids to skill, as are the cutting tools in general. 

114. The strength factor. — Strength is first in necessity, 
but lowest in rank, of the three factors of labor. It is animal 
rather than human. Man has it in common with the brutes. 
It is the cheapest because most nearly a gift of nature. It is 
true it costs years of growth, care, and feeding, but these 
are looked upon as the natural incidents of life, as a part of 
the natural expenditures of parents, and not as economic facts. 
In computing the strength and laboring power of a whole peo- 
ple, the cost of growth and nurture must be taken into ac- 
count. If we accept, with Dr. Edward Jarvis, the period from 
twenty to seventy as ' ' the period of maturity and efficiency " 
in human life, and call these fifty years — twenty to seventy — 
the sustaining period, and the periods below and above these 
ages the dependent periods, then, as he says, "the effective 
power of a nation is in the number of its people in the sustain- 
ing period, and in the proportion these bear to the dependent 
classes." 

The following statistics, taken from a table given by Dr. 
Jarvis, in the "Massachusetts Health Report," 1874, will show 
the efficient strength of several peoples, as determined by the 
per centage of their sustaining and dependent classes. 

By sustaining classes are meant those who, for the time, are 
of the proper age, soundness, and strength to transact the busi- 
ness and produce the support of the population. All others 
belong to the supported or dependent classes. 



ii6 



POLITICAL ECONOMY. 



The figures in the first four columns show percentages of the 
entire population. 





SUSTAINING 


DEPENDENT. ' 




DEPENDENT 


NATION. 










FOR EACH 










1,000 




20 TO 70. 


UNDER 20. 


OVER 70. 




SUSTAINING. 


France, 


60.32 


36.09 


3-64 


39.68 


657 


Switzerland, 


56.20 


41,22 


2.58 


43.80 


779 


Sweden, 


54-51 


42.67 


2.82 


45-49 


834 


Prussia, 


52.62 


45-34 


2.03 


47-37 


880 


England, 


52.21 


45.04 


2-74 


47.78 


915 


Scotland. 


51-30 


45.60 


2.95 


48.55 


946 


Ireland, 


46.50 


52-03 


1.48 


53-51 


1,201 


United States, white, 


49.04 


49.18 


1.80 


50.98 


1,039 


United States, colored 


44.80 


53-60 


1.50 


55-10 


1.229 


Massachusetts, 


56.80 


40.30 


2.80 


43.10 


759 


Georgia, 


44.40 


53-90 


1-50 


55.40 


1,248 



The sustaining class, in France, is ten and one third per cent 
more than one half of the population. In England it is two and 
two thirds per cent. In Ireland it is three and one half per cent 
less than one-half of the population. Among the white people 
of the United States, the sustaining part of the population lacks 
nearly one per cent of being one-half. Among the colored 
people it is nearly five per cent less than a half. 

The sustaining classes represent, loosely, the laboring power 
of the nation. It is to be increased in practice, by the laboring 
power of those under twenty years of age, and diminished by 
the idlers between twenty and seventy. It must also be modi- 
fied by the average strength of each nation and the period of 
effectiveness in each. The average period of efficiency falls 
much short of the fifty years — between twenty and seventy. 
Dr. Jarvis gives the average duration of effectiveness of several 
countries as follows (" Massachussetts Health Report," 1874, 
page 342): 



LABOR— STRENG TH. 



117 



Working Years. 

Norway, _ . . - 39.61 years. 

Sweden, .... 38.10 years. 

United States, males, 37.46 years. 

Hanover, . - - - 35.81 years. 

England, . . - - 35.35 years. 

France, 32.84 years. 

Ireland, 28.88 years. 

115. Cost of human strength. — The cost of rearing a 
child to manhood must, evidently, come into the estimated cost 
of the laboring strength of any nation. * ' The cost, at contract 
prices, of raising an orphan child to the age of eleven years, in 
England, is computed, by Mr. Chad wick, at 130 pounds ster- 
ling (S632.65)." Dr. Jarvis computes the cost of rearing a 
child of the laboring classes, in this country, at fifty dollars a 
year. The child, at eleven, would be worth five hundred and 
fifty dollars. At maturity (twenty years) it would be worth, or 
would have cost, one thousand dollars. 

But, "in estimating the cost of rearing children to manhood, 
it is necessary to include the number of years that have been 
lived by those that fell by the way," says Dr. Jarvis; and he 
gives the following statistics of the loss in raising children in the 
different countries named : 



Number of Years Lived by Those under Twenty for Every One 
Thousand that Reached Maturity. 



COUNTRY. 


years lived 

UNDER twenty. 


PER CENT OF LOSS. 


Norway, 


2,142 


7.10 


Sweden, 


2,182 


9.10 


England, 


2,192 


9.60 


America. 


2,233 


II. 16 


United States, 


2,251 


12.55 


France, 


2,327 


16.35 


Ireland, 


2,514 


25.70 



ii8 POLITICAL ECONOMY. 

Counting in these lost years as costing fifty dollars each, it 
raises the average cost of raising a child to maturity, in the 
United States, to $1,112.55. This does but follow the com- 
mercial custom of charging the cost of all goods, lost or spoiled 
by the risks of manufacture or transportation, to those which 
come through safe. 

116. Variations of labor power. — The average laboring 
power of the men of different nations also differs. Dr. Roscher 
states that "the experiments made with the dynamometer, in 
1800^, show that the average /<?r^^ manuelle of an inhabitant of 
Van Dieman's Land is to that of an inhabitant of New Holland, 
of Timor, of a French marine, and of an EngHsh colonist in 
Australia, in the ratio of fifty, fifty-one, fifty-eight, sixty-nine, 
seventy-one kilogrammes." "It was found, more recently, in 
the American army, that the average lifting power of white sol- 
diers was 314 to 343 pounds; of white marines, 307; students, 
308; negroes, 323; mulattoes, 348; and Indians, 419." "Ac- 
cording to English manufacturers, an English laborer accom- 
plishes almost as much again as a French one, and the latter, in 
turn, more than an Irishman." J. G. Hoffmann claims that "a 
Berhn wood-sawyer accomphshes as much in ten days as a west 
Prussian from Labiau in twenty-seven days." "English farm- 
ers on the Hellespont prefer to pay Greek laborers ^10 per 
year, 'besides their keep,' rather than ^^3 to Turkish labor- 
ers." — Lord Carlisle. 

Gen. F. A. Walker, in his full and valuable work on the 
wages question, gives a long array of facts on the relative labor- 
ing power of different nationalities. I condense a few of his 
statements : " Forty years ago it required fully twice as many 
hands to perform most kinds of factory work in France and 
Switzerland as in England. . . . Mr. Briavoinne gave one 
hundred and sixteen pieces of cloth printed, for each workman, 
per annum. In Belgium the production of certain establish- 
ments, however, was estimated as high as three hundred pieces. 
At the same time, workmen of Ainsworth & Co., in England, 



LAB OR—STRENG TH. 1 1 9 

were turning out one thousand pieces per head. . . . On 
the Grand Trunk Railway of Canada, the French-Canadian 
laborers received three shihings and six pence a day, while 
the Englishmen received from five shillings to six shillings a 
day; but it was found the Enghshmen did the greatest amount 
of work for the money. ... In the quarry at Bonnieres, 
Frenchmen, Irishmen, and Englishmen were employed side by 
side. The Frenchmen received three, the Irishmen four, and 
the Englishmen six francs a day each; and the Englishmen were 
found to be the most profitable workmen." 

117. The loss by sickness. — The loss of time by sickness, 
by bad weather, and by proper holidays, or by the calls of fam- 
ily and society, must also be subtracted from the possible work- 
ing time, and the expenses attending this loss must be charged 
to the cost of the actual time of labor ; for it is evident that the 
sustenance of the body, during such leisure, must be earned in 
the working days. It was estimated that, in 1870, the sick- 
ness among the people of the working ages in Massachusetts 
amounted to 24,553 years and eight months. Enghsh calcula- 
tions affirm that "for every death there are two constantly 
sick — that is 730 days sickness for every death." All this is to 
be deducted from the available strength for labor ; and, indeed, 
from the exercise of the productive skill of a country as well. 

118. The cost of feeding. — Human strength must also be 
constantly renewed by feeding. Daily bread is the condition 
of daily work. Man's body is a living machine which wastes 
by the mere act of living. A man must eat (i) to keep the 
machine in full repair, and (2) to furnish it with working 
power. 

Modern science tells us that heat is working force. The 
body is a furnace, and the food we take is the fuel. A part of 
the force generated by the digestion of the food goes to carry 
on the vital operations of the body, and the remainder is 
available for voluntary muscular effort. 

"It may be reckoned," says Dr. T. K. Chambers, in the 



120 POLITICAL ECONOMY. 

** Encyclopedia Britannica," in the article on dietetics, ''that 
the daily expenditure of force in working the machinery of the 
body — in raising the diaphragm about fifteen times, and con- 
tracting the heart about sixty times, a minute; in continuously 
rolling the wave of the intestinal canal, and in various other in- 
voluntary movements, without any thing to be fairly called 
work — it may be reckoned that the expenditure of force in do- 
ing this is equal to that which would raise a man of ten stone 
(one hundred and forty pounds) ten thousand feet." This is 
the merely involuntary work of an idle man — the work done by 
the body for itself. A definite amount of food is required to 
do this work, and when additional work is undertaken an exact 
equivalent of food must be supplied. A working man will 
starve if allowed only so much food as will keep him while in 
idleness. Dr. Lyon Playfair calculated that the food of a man, 
for ''bare existence," is two and one-fourth ounces of nitrogen- 
ous food, one ounce of fat, twelve ounces of starch,- and one- 
fourth of an ounce of mineral matters per day. For "moderate 
exercise," or "light labor," one-half more of food is requisite; 
and for ' ' hard work " the food must be doubled at least. 

The strength resulting from the food taken must depend, in 
part, upon its healthful digestion, and partly upon the amount 
required to keep up the animal heat of the body. Hence, un- 
sanitary dwellings and insufficient clothing detract largely from 
the utility of the food, and from its recruitment of the working 
power. The half-clad man must use up much of the powder of 
his food in keeping the body warm; while the dwellers in small, 
dark, damp rooms, without sunshine or fresh air, will get but 
half of the good out of their food, and will loose, in unnecessary 
sickness, days and weeks of time. Nothing could be more un- 
economical than the miserable hovels, and especially the dark, 
crowded tenement houses in which the laboring classes are 
often sheltered, • and one may almost say, slaughtered. The 
interests of public and private wealth alike demand sanitary 
reform. 



LABOR— STRENGTH. 12 1 

iig. The substitutes for human strength. — Human 
strength is cheapened as a factor in labor by the fact that it 
has cheaper substitutes which, in many places, may replace it; 
such as the strength of animals and the powers of nature. 
These are steadily driving human labor out of the employments 
where the strength of muscle alone was required. In half civ- 
ilized lands and times, men transport goods, carry travelers, dig 
the soil, row or drag vessels, run as messengers, spin, weave, 
forge, and turn the wheels of rude machinery, furnishing with 
their own muscles the working force of the arts. In enlight- 
ened lands, all these things are done by the harnessed forces 
of nature, and man does but superintend their labor. 

But while the demand for merely muscular labor has rela- 
tively diminished, the demand for men has increased — men 
with intelligence to construct and manage machinery; to search 
out materials ; to superintend labor ; to distribute goods ; and to 
minister to a thousand new wants. Human strength must, 
therefore, forever remain a valuable factor in labor, but it must 
be more and. more mixed with intelligence. 



p. E.— II. 



CHAPTER XI. 



LABOR — SKILL. 



1 20. The skill factor. — Skill, the second factor in labor, 
is, primarily, the product of the intelligence. It is "the 
knowing how," learned by experience and reflection. But per- 
fected skill is also the result of practice. Long continued use 
of mind or muscle, in performing repeatedly a certain act, or 
series of acts, gives the power of thinking, wilHng, and doing 
these acts with a swiftness and precision wholly impossible to 
the unpracticed. It is the power of habit; but it is habit of the 
intelligence as well as of the hand. The movements of the 
skilled artisan seem almost automatic in their quickness and 
accuracy. Recent writers have attempted to account for them 
by reflex action, a sort of animated automatism. But they are 
much more easily and rationally explained by that marvelous 
facility which habit gives to our movements. The rapidity 
with which the pianist touches the keys of his instrument 
would remain as marvelous on the theory of reflex -action 
as upon the more common and more intelligible one of the 
power of habit. 

All movements are, at first, made slowly and with uncer- 
tainty. At each repetition the mind travels a more beaten 
path. Among the myriad possible directions of motion, and 
the endless possible degrees of force, the mind learns, by ex- 
perience, the right one for any given effect, and employs that 
without loss of time. Such is the simplest account that can be 

given of it. Add to this that the much-used power of muscle 

(122) 



LABOR—SKILL. 123 

or mind grows stronger by use, and we have stated all that is 
known of the matter. 

121. Three kinds of skill. — Skill, divided according to 
the powers employed, gives three classes : 

I. Mental skill, in which the mental powers alone are used. 
The power of rapid computation of numbers, of the skilled ac- 
countant, is purely mental. Some accountants learn to add 
long columns of figures, taking three and even four orders of 
units at once, almost as fast as the eye can travel up the 
column, and distinguish the figures. The quick estimates made 
by business men, in their respective lines of trade, also belong 
to this kind of skill. Though each case differs from all others, 
the accountant and business man learn to find, in each case, 
certain common elements and combinations, and so rush to the 
results over well-worn roads. The skill of the lawyer, the 
physician, the orator, and the poet, or versifier, is due largely 
to the same principle. It is the facility of habit — the use of 
movements of mind made familiar by practice. In all these 
cases there is, indeed, a measure, larger or less, of originaraction 
of the intellect, exercised in acts of perception, judgment, and 
reasoning. There are new phenomena to be observed, new 
truths to be cognized, and new arguments and deductions to be 
made. Each trade and vocation, mental and physical, has its 
own tools to be made familiar — its own processes to be learned; 
and it is the province of skill to know and use these with 
certainty and dispatch. 

2. Sense skill, or skill of the senses, resides in the mind and 
senses. It is seen in the power of the practiced eye of the me- 
chanic and trader, to discriminate forms, dimensions, distances, 
colors, and the visible indications of hidden qualities, in mate- 
rials, goods, or persons. The eye of the stock-dealer judges, 
with close accuracy, the weight and qualities of the animal he 
proposes to purchase. The ear of the musician reads, with a 
wonderful definiteness, the pitch, power, and quality of the 
notes in a rapid piece of music. The blind man will often tell, 



124 POLITICAL ECONOMY. 

by the practiced sense of feeling, the color of a piece of cloth ; 
and the wine-taster detects the quality and constituents of good 
or bad wines. The skill of the architect and the engineer 
lies largely in this trained use of the eye to discern directions, 
proportions, and effects. In all these cases the skill belongs, 
partly, to the finely trained sense, and partly to the mental skill 
to read the results. 

3. Manual, or muscular, skill, the kind to which the name 
skill is most frequently applied, resides at once in the mind, 
the sense, and the muscle or nerve. It is revealed through 
muscular movement, but it presupposes the mental and sense 
elements. The practiced hand of the skilled workman follows 
his eye and mind with a movement so prompt that it is diffi- 
cult to separate the act into its natural and necessary parts. 
Eye, mind, and hand seem to move all at once, and* with a 
swiftness which appears to leave no time for thought. And 
what is most singular, the artisan often makes the fewest mis- 
takes when he works with the greatest rapidity. 

122. Special and general skill. — Skill may also be di- 
vided into special skill, which is confined to a single process, 
and general skill, which comprises the ability to perform all the 
processes of any given trade or calling. In modern manufact- 
ures, in which the labor is divided up between as many laborers 
as there are different processes, it is not uncommon to find a 
child performing some one simple operation with as ready a 
skill as the maturest workman, though utterly unable to do any 
other part of the work. Such skill is special, and is learned by 
dint of mere repetitions. It requires no intelligence beyond 
that which is necessary to guide the hand through the required 
set of motions. It is acquired quickly, and demands no special 
ability or general knowledge or education. Such laborers are 
not to be regarded as skilled laborers in the full sense of the 
term. 

General skill — the skill of the full-trained workman in any 
trade — implies a knowledge of all the processes necessary to the 



LABOR— SKILL. 125 

full manufacture of the finished product of his art, as the hat 
of the hatter, the shoes of the shoemaker, the engine of the 
machinist. It implies, also, a knowledge of materials, of styles, 
and of the uses of the article he makes, at least so far as to en- 
able him to vary it to meet demands. Such skill requires years 
of practice and study, and implies some special aptitudes, at 
least for the higher grades of work. The better part of true 
skill is that intelligent mastery of all the principles and pro- 
cesses — of the aims and expedients — of a trade or profession, 
which will enable its possessor to invent new processes as well 
as to practice old ones. It is evident, therefore, that the 
higher the intelligence and the better the education, the higher 
will be the skill acquired, and the speedier its acquisition. In 
the higher technical schools, in which practice shops exist, it is 
found that the students already well trained in mathematics 
and drawing, learn the trade in much less time than ordinary 
apprentices. It can not be doubted that much of the abundant 
inventive power of American mechanics is due to the general 
education diffused among them by the public school system of 
this country, and to the newspaper and other means of public 
intelligence so abundant among the American people. 

123. Cost of skill. — Skill is a more costly factor in labor 
than mere physical strength, for three principal reasons: i. It 
costs more to produce it; 2. It is rarer, and has no proper sub- 
stitutes, at least for its higher forms; 3. It is vastly more 
productive. 

The production of high skill presupposes, not only that long 
period of growth required for the maturity of the mind as well 
as of the body, but also a long period of training and instruc- 
tion. The highest forms of skill also presuppose rare mental 
endowments or genius, which still further limit its production 
and give additional value to its labor. This is especially true 
in the liberal and fine arts, in which special talents, amounting 
almost to genius, are usually deemed essential to success. In 
all the hand crafts it is found that special aptitudes are needed 



126 POLITICAL ECONOMY. 

for the best skill, and not a few apprentices are found unable to 
become good workmen. 

124. Substitute for skill. — The common forms of skill 
have their substitutes. Machinery now performs much of the 
labor formerly done by manual skill. In nearly all the great 
staple manufactures, such as cloth, clothnig, shoemaking, hat 
making, and wood and metal work, the machine has displaced 
the human hand; but only to drive skilled labor to other 
fields. In the higher forms of skill, which we have called 
mental skill and sense skill, no machinery can serve as substi- 
tutes. The master and manager can never be dispensed with. 
Their work grows perpetually higher and more difficult. 

125. Comparative value of strength and skill. — 
Strength and skill enter into different forms of labor in largely 
different proportions, and must clearly lend something of their 
own varying costHness, both to the prices of the labor and to 
the value of the products. Labor requiring but little except 
mere strength of muscle will be cheap in price and cheap in 
product; while labor requiring high skill will command high 
wages, and its products will be costly. 

In the larger fields of work, already mentioned, it will be 
found that those which collect raw materials from nature, em- 
ploy much strength and but little skill, and that their profits are 
small and their products cheap in proportion to bulk. 

Circumstances of extraordinary demand and limited supply 
may give high prices temporarily to strength and to its prod- 
ucts; but in general they must follow the law. 

Another fact of importance, in the relations of strength and 
skill, is the power of skill to aid strength, and, in some degree, 
to displace it. The skilled laborer, by a more adroit use of his 
strength, will often accomplish labor impossible to a laborer of 
greater strength but of less skill. Skill takes advantage of all 
favoring circumstances ; finds the easiest ways to move a mass ; 
makes one end of a load balance the other; and so, by ingen- 
ious devices, makes its strength count double. 



LABOR—SKILL. 127 

"A skilled person goes straight to the mark, while an un- 
skilled one wastes time in finding out what the mark is, and 
what is the way to it," says Prof. Rogers. 

126. Tools, the third factor. — Tools are the implements 
with which strength and skill do their work. They are artificial 
hands, eyes, feet, and power. They help man to do more 
easily and better what in some cases he could do without tools; 
but what in many cases he could not accomplish without their 
aid. Tools have not usually been considered as a factor of 
labor, since they are always a form of capital; but it is evi- 
dent that little labor is done without tools, and in any proper 
discussion of labor they can not be left out. "Man is a tool- 
making animal," said Franklin; and it is hard to conceive him 
as laboring without these aids. 

The use of tools is as old as labor itself. The first man that 
used a stick to strike his prey or defend his life, or a stone to 
crack a nut, used a tool, and used it for the same purpose for 
which modern tools are used — to lengthen his arm, and to ex- 
ert his strength at a distance, and in a manner or with a force 
not easy or natural. The first rolHng stone or round stick em- 
ployed to move a load; the first string or pry used to lift a 
weight; the first sharp flint stone taken to cut or split a piece 
of wood, or to dig a hole in the ground, — had in them the 
germs of all the tools and machines of modern times. 

127. Machines. — Tools have been defined as implements 
in which the power is furnished by the hand using them; ma- 
chines as those in which the power comes from some other 
source. The distinction is not very important. Tools are 
simple machines. Machines are only more complex tools. A 
loom is a machine, whether driven by the hand of the weaver, 
or by the power of steam. 

Machines may be usefully divided into hand-machines, or 
such as are driven by the strength of the laborer using them; 
and power-machines, or such as are driven by some of the in- 
animate powers of nature. Economically, they differ more in 



128 POLITICAL ECONOMY. 

their efficiency than in their mechanical principles. The hand 
machine is, generally, more simple and less efficient. The 
weaver with a hand-loom, having to supply power, must con- 
fine himself to one machine. Six power-looms are sometimes 
managed by a single operator. 

128. How tools work.— Tools aid labor by aiding either 
strength, or skill, or both. The lever, the pulley, the wheel 
and axle, and the wedge, add to man's strength, or, rather, en- 
able him to unite many efforts in a single result. The cutting 
instruments aid both strength and skill. With the latter he 
cuts down a tree, and shapes from its trunk his canoe, or furni- 
ture for his cabin. With the former he moves the logs to the 
chosen site, lifts them to their places, and builds his house. 

"Power machines" are instruments of both strength and 
skill. They have added enormously to man's power over na- 
ture and its masses. The drainage of Haarlem Lake, in Hol- 
land, which gave back to human habitation seventy square 
miles of dry land at the lake's bottom, was effected by enor- 
mous steam-engines, one of which worked ten pumps and 
lifted, at each stroke, one hundred and twelve tons of water to 
a height of ten feet. At the celebrated iron-works of Creusot, 
in France, there is a steam-hammer weighing eighty tons, and 
on its huge anvil a mass of iron of one hundred tons can be 
handled easily by means of four powerful cranes. The works 
of the fabled Titans scarcely exceeded this. The same com- 
pany cast, in April, 1878, a steel ingot weighing one hundred 
and twenty tons. They exhibited, at the Paris Exposition of 
1878, a steam-engine of 2,640 horse-power. 

At the other extreme, the watch-making machinery produces 
screws so small and fine as to require a microscope for their 
use, and all the minute and polished wheels of the smallest 
watches are made with such unvarying precision that those of 
one watch may be put in any other of the same class. 

129. How^ machinery cheapens products. — Tools and 
machines, by reason of their great effectiveness, are cheaper 



LABOR— SKILL. 



129 



agents of production than the human strength and skill which 
they so largely supplement and displace. Hence, the goods 
produced by machinery are vastly cheaper than the same 
classes of goods formerly produced by hand-labor. 

The cotton manufacture affords a conspicuous example. Up 
to the year 1769 cotton was spun by hand. The following 
statement of the cost of cotton-spinning and values of cotton 
yarn are collected from the article "Cotton," in the '/Ency- 
clopedia Britannica," and arranged in tabular forms for ease in 
comparison. The higher numbers indicate the finer yarns. 



Cost of Spinning Cotton Yarn and Price of Such Yarn Per Pound. 



DATE. 


YARN. 


SPINNING. 


DATE. 


YARN. 


PRICE. 


1775 


No. 


60 


25s. 




1786 


No. 90 


3 IS. 


1775 


No. 


80 


42s. 




1786 


No. 100 


38s. 


1786 


No. 


90 


7s. 




I79I 


No. 100 


29s. 9d. 


1786 


No. 


100 


lOS. 




I79I 


No. 100 


29s. 9d. 


1790- 


No. 


100 


4s. 




1793 


No. 100 


15s. 9d. 


1792 


No. 


100 


3s. 


Id. 


1799 


No. 100 


los. iid. 


1793 


No. 


100 


2S. 


6d. 


1805 


No. 100 


7s. lod. 


I 795-1826 


No. 


100 




8d. 


1827 


No. 100 


3s. 2d. 


1826 


No. 


100 




6d. 


I83I 


No. 100 


23. lid. 



Since 1831, there have been many fluctuations, but within 
narrow limits. In 1876, the prices for No. 100 yarn were, 
for warp-twist, 2S. lod. ; for medium, 2s. 6d. ; and for weft, 
IS. lod. The quantity which one workman can produce 
has been as much increased by the improved machinery 
as the cost of labor has diminished. In 1779, in England 
and France mobs of spinners broke in pieces the spinning- 
jennys, as threatening their trade. The machine survived, 
and, in 1876, the number of persons employed in the cot- 
ton manufacture, in England, was 479,515; and the wages 
paid to spinners, per week, are : 



130 POLITICAL ECONOMY. 

Mule overlookers, thirty-five to forty shillings. 
Self-actor tenders, thirty-two to forty shillings. 
Throstle spinners, twelve to fourteen shillings. 
Throstle overlookers, thirty to thirty-five shillings. 
Self-actor piecers, fourteen to seventeen shillings. 
Throstle doffers, nine to eleven shillings. 

The latter classes are usually girls. 

The number of spindles run by this army of spinners is 
41,881,789, each one of which does as much work as the one 
spindle run by an old-time hand-spinner. In 1801, the annual 
consumption of cotton, by the manufacturers of Great Britain, 
was 48,400,000 pounds. In 1876, it was 1,280,300,000 
pounds. 

The first cotton mill furnished with the Arkwright spinning 
machinery was opened, in Rhode Island, in 1790, with seventy- 
two spindles. In 1800, the mills in the United States con- 
sumed about 150,000 pounds of cotton annually In 1870, the 
number of spindles in the United States was 7,132,415; and 
the cotton consumed was 398,302,257 pounds. 

The machinery for weaving cotton came much later than that 
for spinning. Cartwright's first power-loom was made in 1784, 
but so slow was its progress that, in 181 7, most of the cotton- 
cloth made in England was still woven in hand-looms. In 
1 81 3, all the cotton yarn spun in America was still manufact- 
ured into cloth by hand-looms. As late as 1825 the retail price 
of printed calico, for dresses, was fifty cents a yard. To-day, 
1883, calicoes, of about the same grade, are retailed freely for 
five cents a yard. Then the week's wages of a servant girl 
would buy one yard of calico; to-day the week's wages will buy 
six dresses of ten yards each. 

The history of many other manufactures, though not so 
wonderful as that of this world-wide, world-clothing cotton 
industry, exhibit nearly the same phases in the introduction 
of machinery, and the consequent increase of production and 
fall of prices. 



LABOR— SKILL. 131 

130. The economic revolution. — The most remarkable 
industrial and economic revolution the world has ever seen, has 
been effected by the improvement and invention of machinery 
within the last hundred years. Most of it has occurred within 
the last fifty years. It is the displacement of the handcrafts by 
machine work. One of the trades after another has been in- 
vaded by the all-conquering machine. The spinners and weav- 
ers yielded to the spinning-jenny and the power-loom. The 
shoemakers and tailors are yielding to the sewing, cutting, and 
pegging machines. Machines are taking from the hatter his old 
employments; and the smiths and wagon-makers are supplied by 
machine work, with all the separate parts of their various struct- 
ures, ready to be put together, with but little hand-labor. 
Horse-shoes, nails, bolts, screws, and all forms of iron work are 
prepared by machinery for the blacksmith; and the wagon- 
maker buys, from as many different manufacturers, all the sev- 
eral parts of the wagons and carriages he wishes to produce. 
The carpenter buys machine-made doors, sash, cornice, brack- 
ets, moldings, and, if he wishes, the entire frame and prepared 
materials for his building. 

One by one the old handcrafts are disappearing, or are re- 
duced to the putting together, or repairing, of the products of 
the machines ; the watch-makers have yielded to the watch fac- 
tories ; the printer has lost his place at the press, and only waits 
till the type-setting and distributing machines shall also push 
him from the case, and tell him to "go up higher " — to easier 
work and higher employment and better wages — for such has 
been the effect of the revolution thus far in the long run. 

The little shops which lined the streets and dotted the land by 
the roadsides have nearly disappeared, or been turned into 
places of sale and repair. The old shoe-shop, hatter' s-shop, and 
tailor's-shop are replaced by the great shoe, hat, and clothing 
stores. The old ''journeymen" craftsmen have gone, and in 
their places have come clerks and salesmen for the stores, and 
overseers and operatives for the factories. 



132 POLITICAL ECONOMY. 

131. A new Political Economy required. — The large 
introduction of machinery into the fields of human industry 
has, in many respects, changed the problems of Political and 
Social Economy. These problems are now not only larger and 
grander than those formerly presented for the study of econo- 
mists, but they vary in so many respects that they would of 
themselves call for a reconstruction of the science. The aggre- 
gations of wealth have become so immense; the accumulations 
of capital in the hands of single men and of great corporations 
are so enormous; the whole machinery of production has so 
changed its character, as well as its productive power ; and the 
facilities of transport and communication have been so marvel- 
ously enlarged, that economic science confronts, to-day, entirely 
new conditions. 

132. Results of the revolution.— This chapter is con- 
cerned only with the economic effects of this industrial revolu- 
tion. Its influence on the laborers and on society belongs to 
Social Economy. 

The economic results may be summed up as follows: 

1. It has changed the character of labor; lessening the de- 
mand for the old forms of skilled labor, and Hghtening the tax 
on strong muscles. 

2. It has lessened the cost of production, and has thus greatly 
lessened the market values of goods. 

3. It has vastly increased the production of goods, and has 
diffused their use among greater numbers of people. 

4. It has compelled the seeking of more distant markets for 
the surplus of products, and has thus set in motion a wider 
commerce. 

5. It has multiplied largely the accumulated wealth of the 
world, and has thus provided more and cheaper capital. 

6. It has called into being new forms of industry, both intel- 
lectual and physical, and has thus furnished labor new employ- 
ments, most of them better paid, and of higher character than 
the old. 



LABOR— SKILL. 133 

7. There is another result which comes sometimes from this 
enormous production. It drives manufacturers into strenuous 
competition for the markets, and crowds down prices and wages 
to a ruinous extent. The evil has its own cure in the failure of 
the manufacturers themselves, or in the forced changes of 
production. The too eager manufacturer, after having reduced 
to the utmost the cost of his goods, and reduced, for this pur- 
pose, the wages of his operatives, finds, not unfrequently, that 
he has ruined his markets; and, when a temporary glut or 
financial stringency depresses still further the market prices, 
failures follow. 

Other results may follow when the revolution is complete. 
It is certain that great social changes are involved, which must 
be discussed elsewhere, if at all. 

This closes the consideration of the three factors of labor. 
Beginning with rude strength, it ripened into skill, and its tools 
grew into machines, by which human forces mounted to their 
great mastery over matter and force. 



CHAPTER XII. 



INTELLECTUAL LABOR. 



133. Mind work. — The mind guides the hand in all human 
labor. All such labor has, therefore, its intellectual side or 
element. As has been shown, this intellectual element is the 
very source and foundation of skill. And every advancement 
in the quality and condition of physical labor is marked by a 
larger and higher intelligence. 

But there are forms of labor in which the intellect is the sole 
force employed, except as the senses may be summoned to aid 
in the investigations, and the hand to make record of the 
result. 

The labors of the intellect do not directly effect physical 
changes or create material values; but these labors are, never- 
theless, the most important known to the business world, and 
can not, therefore, be left out of any complete survey of eco- 
nomic science. Intelligence not only doubles production, but 
doubles also the values of the things produced. The ignorant 
and degraded have as little power to appreciate and enjoy 
goods of great fineness and beauty as they have to produce 
them. 

134. Ideas give values to goods. — Goods are valued in 

proportion to the number and dignity of the ideas wrought into 

them. Those which simply feed and warm the body, however 

necessary they are for life, are held in slight esteem. Those 

which suggest ideas of personal beauty and dignity, and can 

help to attract admiration or awaken esteem, command a 
(134) 



INTELLECTUAL LABOR. 135 

higher price. Those in which high genius has embodied its 
grand conceptions, and in which fine art has wrought its forms 
of beauty — which come to a man as a vision of supernal glory, 
and feed him with thoughts of the ineffable and the perfect — 
these goods of the soul are of prices which astonish the igno- 
rant and the uncultured. But the goods into which affection 
has poured its labor, and with which love has woven its very 
life, are counted beyond all price. 

The real life of man is sentient and intelligent. Out of this 
life spring all motives of voluntary action, all feelings of want, 
all desires of happiness, all struggles to obtain good and to 
avoid pain, all work and business of whatever kind. All the 
laws and forces of economic science, exist for and center in 
this real, this intellectual, life of mankind. The vast procession 
of the industries, with all their triumphs of art and treasures of 
wealth, moves as the body-guard and supply-train of that kingly 
thing, the human mind, which orders the march and rides 
up-borne, central, and high, amidst the mighty movement. 

135. Intellectual labor productive. — To the intelligent 
economist who discerns clearly the real significance of human 
industries, thought-guided and spirit-serving as they all are in 
the last result, there is no difficulty in admitting intellectual 
labor to its proper place and rank in the world of productive 
work. The working power of the intellect is the finest skill, 
and its products are the finest forms of value. This skill is the 
rarest and costhest, and these values are the highest and best. 

Some of the earlier economists refused to call any labor pro- 
ductive which did not result immediately in a material product. 
Even Prof. Roscher says: "Strictly speaking, only those em- 
ployments should be called productive which increase the 
world's resources." This would shut out from productive labor 
all but the final processes by which the material products are 
brought forth or shaped. All the work done in planning, 
arranging for, supervising, and managing the labor, counts for 
nothing. All the discoveries, inventing, training, and educa- 



136 POLITICAL ECONOMY. 

tion^which has made the production possible counts as nothing; 
the few physical movements of the laborer's hand, according to 
this theory, are alone productive. How evident, on the con- 
trary, is it that each product is the result of all the causative 
acts, mental or physical, which were in the chain of causation ? 
A watch is the product of all the thinking and all the working 
which conspired to produce it. If it be said that what is in- 
tended by productive is productive of material goods, then we 
'have it affirmed that only labor producing material goods is to 
be counted as productive of material goods — a truism, but 
wholly insignificant. The truth is, that the distinction between 
productive and non-productive labor is foolishly taken and 
wholly unimportant. It is one of the juggles of communism to 
persuade physical laborers that they alone create the world's 
wealth. 

136. The two fields of mind work. — We conceive the 
intellect as working in the world of matter, and in the world of 
mind and ideas. 

In the world of matter, it investigates and invents. These 
two processes exhaust its activities. The one is the labor of 
observation and discovery ; the other is the labor of creation 
and construction. 

If the field of its labor is nature itself, or matter in its natural 
aspects, the investigator discovers science — the facts and laws 
of nature. The inventive mind, in this field, creates theories, 
constructs systems, and invents new combinations of matter. 

If the field is that of man's work in matter — the field of the 
material arts — the investigator discovers the nature of known 
processes and the causes of observed changes. The inventor 
devises new processes, and invents the machinery for effecting 
the changes. The investigator discovers a law or fact; the in- 
ventor creates an art. Often the investigator and inventor are 
one. The same mind works in both fields. 

In the field of business and trade, the investigator seeks to 
discover the wider facts and forces of the social and economic 



INTELLECTUAL LABOR. 137 

world — the drifts of production, the laws of markets, and the 
economic changes among peoples. The inventor plans and 
creates great business enterprises, combines large masses of 
capital, and organizes labor. The great business manager most 
frequently unites these two functions, and by virtue of these 
leads as a captain of industry. 

137. The three intellectual industries. — The most com- 
mon forms of intellectual labor employed in the industrial 
world, as now organized, are of these three chief classes : 

1. Clerks and accountants. 

2. Managers and superintendents. 

3. Discoverers, inventors, designers, and experts. 

The labor of the first class needs no discussion. The labor- 
ers of this class conduct the correspondence, make the records, 
and keep the accounts — matters as necessary to the regular and 
successful on-going of the whole work as the thoughtfulness 
which plans the enterprise and guides each hammer stroke in 
the labor. It contributes directly to the production, and is to 
be credited with its share of the values produced. 

Clerks and accountants may be counted as aids to the brain 
power of a business. They are the eyes, voice, and hearing, 
and through their aid materials are collected from distant 
points, laborers are summoned, and goods are sold in the far 
away markets of the world. Operations involving millions of 
treasure, and the cooperation of thousands of people, are, by 
their aid, carried to success. 

138. Managers and superintendents. — The labor of 
management and superintendence, when performed by a paid 
agent, follows the same rule as that of clerks and accountants, 
though it is of higher character, and involves a larger skill and 
wider responsibility. It is the work, on a greatly magnified 
scale, which every solitary worker is obliged to do for himself 
if he would work successfully. It includes the choice of work 
to be done, and of time, means, and methods of doing it, to- 
gether with providing the necessary materials and tools. The 

p. E.-12. 



138 POLITICAL ECONOMY. 

manager is the brain power of the enterprise. He invents or 
plans it, and directs it to its completion. 

The manager is also, in part at least, a superintendent; but, 
in great enterprises, involving a wide field of practical opera- 
tions, and employing many laborers, the manager has other 
superintendents as his aids, charged with the supervision of 
groups of labor, or fields of operation. These aids take the 
names of foremen, overseers, or superintendents, in different 
forms of business. 

In great business corporations, like railway and banking cor- 
porations, as also in the great stock companies of manufacture, 
the manager is a salaried officer or agent, and conducts the 
business for his employers. But in most cases the manager is' 
also proprietor. The business is his own, and he plans the 
work, provides the capital, buys the material, pays all wages, 
assumes all risks, and takes, as his own, all the profits, after 
meeting the expenses attending the business. 

In the smaller business enterprises, conducted by a single 
person, acting as both capitalist and laborer, the business of 
management is lost sight of, it is so inconsiderable in amount. 
The small shop-keeper plans his work from day to day, buys 
his materials as he needs them, hires such help as he requires, 
and markets his products when finished, without taking account 
of the brain work he has done through it all. It is only when 
the enterprise swells to wide proportions, and demands days 
and nights of careful planning and vigorous thought, that the 
business of management stands out from the other labor as a 
distinct and difficult work. 

J. B. Say, in his " Political Economy," describes him who is 
here called a manager as the "master-agent or adventurer," 
^ I' entrepreneur y "This kind of labor," he says, "requires a 
combination of moral qualities that are not often found to- 
gether — ^judgment, perseverance, and a knowledge of the world, 
as well as of business. He is called upon to estimate, with tol- 
erable accuracy, the importance of the specific product, the 



INTELLECTUAL LABOR. 139 

probable amount of the demand, and the means of its produc- 
tion ; at one time he must employ a great number of hands ; at 
another, buy or order the raw material, collect laborers, find 
consumers, and give, at all times, a rigid attention to order 
and economy; in a word, he must possess the art of superin- 
tendence and administration.'^ If such were the qualities re- 
quired in the times of Say, how much more in these days, 
when business enterprises have taken such immense enlarge- 
ment! It is not uncommon for one enterprise now to employ 
several thousand men. Schneider & Co., according to the re- 
port of the American Commissioners to the Paris Exposition of 
1878, employ, in their steel and iron-works at Creusot, 15,000 
persons. The celebrated iron and steel-works of Krupp, at 
Essen, Germany, according to the same reports, give employ- 
ment to 8,500 laborers, besides 5,300 employed in their iron- 
mines. 

M, Dunoyer, and other French economists, have described, 
with much force, the rare talents required by V entrepreneur. 
Gen. F. A. Walker, in his work on "Wages," has discussed, 
with equal fullness and ability, the function and qualifications 
of this employer or managing class. He strongly insists that 
"when men who are unfit to conduct business, force them- 
selves into the employment of labor, it is at the expense of 
labor," Evidently, none should assume the high responsibilities 
of so difficult and important a place without first carefully tram- 
ing themselves for their work. No more serious tax falls upon 
labor, or upon the general business inteiests of the country, 
than the inevitable and disastrous failures of incompetent 
managers. 

In the most recent forms of business, which seek to mass 
labor and capital to the utmost, the work of management usu- 
ally requires talents of the highest order. The successful man- 
ager of great commercial and business ventures must have 
Napoleonic will and skill in command. He needs the intelli- 
gence, sound judgment, decision, energy, and courage which 



I40 POLITICAL ECONOMY. 

we attribute to statesmen; and he must add to these the tireless 
industry and endurance of the frame of iron. These quaUties 
are so rare that they will, necessarily, command large reward, 
and will easily contrive to obtain it. They create business, and, 
if justly employed, make for labor and capital wide and fruitful 
fields. 

139. Work of scholars. — Scientific scholars, discoverers, 
and inventors have only, within the present century, come to 
hold a recognized place among the industrial and producing 
classes, and to be counted in with the economic forces of the 
world. Scholarship itself formerly shrunk from too intimate 
association with labor; and labor despised scholarship as the 
idling of drones, or the dreaming of impractical enthusiasts. 
But the arts have now become scientific in character, and seek 
to employ, under scientific conditions, the forces of nature and 
the occult properties of matter. Great competing industries 
dare not trust to the mere energies of skilled workmen pitted 
against the combined science and skill of their rivals. The 
work of the scientific scholar and expert has become as neces- 
sary to success as that of the manager, the capitalist, and the 
common laborer. 

Chemists, designers, inventors, and mechanical engineers are 
now regularly hired by most of the larger manufacturing estab- 
Hshments, and even the highest class of scientific investigators 
are not unfrequently called into service to aid, by their knowl- 
edge, the operations of industry. 

Intellectual and scientific attainments may be counted, in 
their relations to industry, as a higher form of skill. They 
lend new efficiency to the productiveness of labor by teaching 
it how to overcome difficulties, or by bringing to its aid new 
powers and properties of matter, or by devising new and more 
valuable forms of products. Our great manufactories are full of 
new machinery which science helped to invent; and the great 
warehouses are replete with goods which science aided to con- 
struct. The Bessamer steel, the nickel-plated wares, the scien- 



INTELLECTUAL LABOR. 141 

tifically constructed tools, machines, and vehicles, the thousand 
compounds which chemistry has given to the arts, or added to 
the stores of drugs, disinfectants, fertilizers, dyes, preservative 
paints, and food adjuncts, and the great family of electric arts 
and products, are among the applications of science to the arts 
which have made modern industry rich over all its forerunners. 

The technical schools of Europe and America are revolution- 
izing the common industries both in their processes and in their 
personelle, their superintendence and their labor. 

The aid given to commerce by scientific navigators, explor- 
ers, and chart-makers, who have marked the oceans with the 
shortest and safest paths for ships, and have laid down on their 
maps the "rivers in the seas," in whose swift currents com- 
merce may find helps for its sails and its steam; the vast im- 
provements made in the means of transportation by land and 
sea, bringing into near neighborhood the distant shores, and 
making the markets of all continents open to the productions 
of each; and the work of that marvelous and most useful or- 
ganization, the Signal Service Bureau, which tracks the storms 
on their wild way, and gives to all concerned warnings of their 
approach — all these are the works of scholars and inventors. 
They have opened the world itself as a field for manufacturing 
enterprise; and they are steadily changing all the economic 
conditions of mankind, master and man. 

140. Inventions and discoveries are goods. — Invent- 
ors and designers often work on their own account, and sell 
their discoveries and inventions, as other goods are sold in the 
market. These products are immaterial in character, consisting 
essentially, in ideas of forms, of combinations, or of devices for 
the applications of forces and the production of results — ideas 
which remain intangible and non-producing till applied to 
material things. 

Society and government have wisely and justly recognized 
property values in these ideas, and have taken care to secure 
ownership to the inventor in his work, as they secure owner- 



142 



POLITICAL ECONOMY. 



ship to other laborers m the products of their labors. Most 
modern governments give to the inventor a patent, securing 
him the sole right to use or sell his invention for a term of 
years — long enough, it is supposed, to pay him for his labor. 
Holland and Switzerland have no patent laws. This right, 
while it is thus limited, is a portion of the world's wealth; but 
when the patent expires, the invention ceases to be property, 
and merges in the great mass of nature's gifts, or of that store 
of ideas and knowledge which mankind have been acquiring 
during the long periods of their history. 

141. Education a productive labor. — Education, which 
in general is a personal service, is now, in some cases, properly 
enough counted among productive labors. Technical and trade 
schools, for the training of experts, overseers and operatives, 
are adjuncts or substitutes for apprenticeships, and as such bear 
almost as direct a part in production as the sharpening of tools 
or the construction of machines. In our own country, these 
schools are multiplying and steadily taking higher rank. Many 
of them have practice shops, and aim to give manual skill. 
The great technological schools of Moscow and St. Petersburg 
give full courses of manual instruction, in connection with a 
full scientific education. The National School of Watch-mak- 
ing, at Cluses, Savoy, and the Apprentice School of the city 
of Paris, aim simply to make skilled and intelligent workmen. 
Many of the great manufacturers of Europe connect, with their 
establishments, schools for the instruction of their younger 
workmen and the children of their operatives, in order to train 
up a more intelligent body of laborers for their own works. 
In the higher polytechnic schools, the chief aim is to teach the 
sciences and their useful appfications in the arts. They all 
have economic aims, and may, therefore, be counted among 
the productive forces. 

142. Second field of mind work.— The second grand 
division of intellectual labor deals only with the mind and its 
products. It does not aim at material results except as these 



INTELLECTUAL LABOR. 143 

may be necessary to exhibit and convey to others the mental 
products or are necessary concomitants of these. The book 
of the author is the means of conveying the products of his 
study and thought. 

This field of labor embraces man. in his mental, moral, 
esthetic, religious, social, and pohtical aspects. As the physi- 
cal industries seek to meet man's physical wants, so these in- 
tellectual industries seek to satisfy his intellectual desires and 
needs. The scientist and philosopher labor to gratify man's 
love of knowledge, and need of light; the teacher gives him 
mental culture and the elements of science and learning; the 
poet and artist address their labors chiefly to his sesthetic 
tastes; the statesman and pubHcist discover for him his vari- 
ous rights and relations, and the organizations by which these 
may be best preserved and enjoyed; the lawyer aids him to 
secure the benefits of the laws; the preacher ministers to his 
rehgious and moral nature; and so each intellectual laborer 
has some field of spiritual desire or want to which he directs 
his efforts. 

The work of the lawyer, the physician, the teacher, the 
preacher, the lecturer, and the musician and play-actor, be- 
long to the class of services, and will find their place in 
another chapter. 

143. Intellectual labor and property. — As already 
noticed, this division of intellectual labor, like that which con- 
cerns itself with matter, subdivides into two classes, that of 
the investigator and that of the inventor, though the two are 
rarely kept distinct. The investigating mind seeks to discover 
facts, to learn the truth, and to determine the philosophy or 
ultimate reason and relations of facts. This class of work is 
to be done equally in all departments of knowledge and art; 
in political science, in mental and moral science, in aesthetics, 
in history, and in education. The investigator presents the 
products of his work, in a book or periodical, or from the 
platform. Society recognizes the value of the product, and 



144 POLITICAL ECONOMY. 

government secures to him ownership in his book, or its con- 
tents rather, by giving him a copyright. Men buy his book, 
or pay him for his lectures: they purchase his thoughts. If 
they do not pay him in money, they give him that higher com- 
pensation, honor and fame, more coveted by noble minds 
than money. 

When his copyright expires, his ideas cease to be property, 
because they have lost the element of ownership, without 
which, as was shown in a former* chapter, value can not ex- 
ist. His discoveries pass into the common stock and belong 
to all mankind, as do the air we breathe and the light which 
gives us vision,, 

This intellectual property is not usually enumerated in the 
tax hst, nor counted in the census, but it still has value. It 
■'ij&as cost effort; it possesses high utility; and it acknowledges 
ownership. A copyright and all it covers may be sold, as 
one sells a farm. Intellectual property differs from material 
property simply as mind differs from matter. Its high economic 
force and importance will not be denied by any one who has 
studied carefully the influences which act upon mankind and 
inspire their industries. He who makes a machine helps one 
industry ; he who discovers, or puts into clearer light, a great 
truth, aids all industries. 

As the living man can not be dissected, and his mind sep- 
arated from his body; so, in the wide range of his desires and 
gratifications, the intellectual can not be wholly divided from 
the physical. In the final and truest analysis, all efforts put 
forth to meet man's needs are true labor; and all products 
of such efforts, rightly understood, possess value, whether 
sold in the common markets of goods, or in that higher 
market in which men buy wisdom and power. 



CHAPTER XIII. 



SERVICES. 



144. Services defined. — There is a class of gratifications 
which labor yielcis directly to human desires, without produc- 
ing material values. These are called services. Thus, one 
who sings us a song, teaches us a truth, brushes our clothing, 
drives our carriage, or saves from pain or trouble, does us a 
service. A service, in the strictest sense of the term, is a grat- 
ification rendered directly, without the intervention of goods; 
but we commonly count as services, also, the labors of do- 
mestic servants who prepare and serve our food, care for our 
houses, clothes, and other property, though much of their 
labor is bestowed upon material goods. They are supposed, 
however, to cover that final effort by which goods are taken 
and put to their uses, and which most consumers make for 
themselves. 

Services, like other labors, divide into physical and intellect- 
ual. The labors of the lawyer, the teacher, the physician, and 
the clergyman, are commonly called professional services, be- 
cause they meet needs, but do not create values of the material 
sort. 

As simple gratifications, services would not, ordinarily, come 
within the range of economic science, any more than the grati- 
fications which men take immediately from nature, from air, 
and sunshine, and scenery, or from the gratuitous services of 
friends. But the efforts by which these gratifications are given 

have economic value, and may be exchanged or purchased, the 
p. E.-13. • (145) 



146 POLITICAL ECONOMY. 

same as productive labors. The strength and skill employed 
must be produced, trained, and supported. 

145. The power of service valuable. — The thing actu- 
ally sold or exchanged in service is the use of power which ren- 
ders the service. This power has utility, costs effort, and is 
held in strict ownership by its possessor. It thus has the three 
essential elements of value. Its use is sold as one sells the use 
of a house in renting it. 

This power can not be separated from its possessor, and can 
not, therefore, be permanently alienated. It is sold for a lim- 
ited time, and for that time its use belongs exclusively to its 
purchaser. If I hire a band of musicians for an evening, I buy 
their musical powers for that evening, as much as if I pur- 
chased, for the evening, the use of an automatic music-box. 
So, also, if I employ a domestic servant, or a professional man, 
it is, in effect, a temporary purchase of their powers of service. 
In slavery, the power of the slave is the permanent property 
of the master. In free labor, the laborer sells his own services, 
to which he has the right; in slavery, the slave and his services 
were sold by some third party, who could have no right to 
them. 

146. Productive and service labor contrasted. — In 
the employment of mechanical or other productive labor, there 
is also a virtual purchase, for the time, of the laboring power 
and skill of the laborer. But the labor differs from that of serv- 
ice in the results. The former leaves a valuable product in the 
goods which it helps to produce; the latter affords an immedi- 
ate satisfaction, and leaves no permanent product of value. 
The one produces the means of a future gratification ; the other 
produces the gratification itself at the moment. It is evident 
that the means of future gratification — the goods produced by 
the laborer — belong to the purchaser of the labor as much as 
the immediate gratification does. 

The difference in results may seem slight, as it is a question 
between a present and a future pleasure or satisfaction; but, 



SERVICES. 147 

• 

economically, this difference is of great importance. In each 
case there is a consumption of old values used up in the sup- 
port of the laborers; but in the one case, the values consumed 
reappear immediately, with an increase, in the new values pro- 
duced. Something has been added to the world's wealth, and 
it remains as an economic force to enter into new economic 
movements. In the other case, the old values disappear, and, 
ordinarily, nothing remains but the evanescent feeling of 
gratification or relief, save in the case of productive power 
described in the following article. 

147. Productive services. — Many services may be said 
to be productive. All services are productive in the highest 
sense, which strengthen the physical energies of men, increase 
the intelligence, improve the character, lend courage or energy 
to the mind, or promote the public intelligence and civilization. 
The service of the teacher leaves a product of the highest per- 
sonal and economic worth. No investment of accumulated 
wealth ever made by civilized men has been more productive 
than that made in the diffusion of education and intelligence. 
The rapid increase of the world's wealth, within the last half 
century, over and above that of all former ages, is traceable 
directly to the schools which have educated labor, and led to 
the wealth-giving discoveries and inventions. 

The services of the teachers of morals and religion are also 
productive in character, and have added to the wealth of man- 
kind far beyond their cost. They have checked the growth of 
extravagant and wasteful vices; saved life, health, and working 
power; given additional safety to property, and thus lent fresh 
impulse to production by increasing the motives both to toil and 
to save. 

The services of musicians, and others who minister to the 
higher amusements of the people, though less commonly 
counted productive, are not necessarily unproductive. Recrea- 
tion, wisely used, conserves energy, and may add to the 
motives and the power for work. 



148 POLITICAL ECONOMY. 

148. Lawyers and physicians. — The services of the 
lawyer have, usually, a more direct and immediate connection 
with the business interests of mankind. As a counselor he 
aids in effecting the legal exchange of property; helps in form- 
ing contracts, and interprets and secures the legal rights of his 
clients. His services in prosecuting crime, and in administer- 
ing the laws, belong chiefly to the domain of social and politi- 
cal life. If his functions take their utility largely from the 
ignorance and dishonesty of men, they are none the less useful, 
since ignorance and dishonesty are unavoidable. The wide 
movement and immense machinery of the modern industries 
and business could not be guarded and controlled without the 
aid of laws equally wide in scope and power. 

The physician's services are more purely personal in char- 
acter, since they minister to the health of individuals; but their 
economic relations are direct and important. In so far as they 
save life and preserve working power, they save property. To 
abate sickness and restore health is to stay wasteful expendi- 
ture and give back productive force. If the physician is also a 
sanitarian, and gives his professional aid to the stamping out of 
epidemics and the promotion of pubUc health, his services often 
acquire inestimable usefulness in saving whole populations from 
needless sickness and loss. 

149. Services and goods compared. — The difference 
between service and productive labor has been shown to lie in 
their results. The difference between services and goods is 
often still less. Both yield an immediate satisfaction. The 
gratifications may be the same. The musician gives me music 
by his own effort; the music-box also gives me music. The 
teacher or orator serves me with his voice ; in buying a book I 
may purchase the same instruction. In those goods which are 
consumed, in yielding a single satisfaction, the likeness to serv- 
ice is stronger. If I would have a new gratification, I must buy 
a new feast, or a new service. 

In one sense, all goods are services, since they all have util- 



SERVICES. 149 

ity, or power, to meet some want of man, directly or indirectly. 
Noticing the similarity in effects, several economists have 
adopted the term services in the place of goods or values. 
They speak of the exchange of services when they mean the ex- 
change of goods. Bastiat and Perry employ the word service 
in their definitions of value. But this obscures an important 
economic distinction between the two. All goods may be 
serviceable, and hence services; but all services are not goods. 

The true service must be rendered directly to the person, 
and the effort must be repeated with each enjoyment of the 
service. In goods the service is stored up, and may be pre- 
served, transported, and enjoyed as often as one pleases, and as 
long as the goods last. 

The power of true, service lies in the person serving, and can 
not be alienated or transferred. Its use alone can be sold, 
and for the occasion only. In goods the power to serve is im- 
personal, and can be transferred as property. It goes to make 
up the volume of material wealth, whose aggregations consti- 
tute one of the three fields of economic science. The com- 
mon sense of the world recognizes the difference and counts 
upon it. 

150. Numbers of service workers. — The economic im- 
portance of services will be better understood by noting how 
large a part of the industry of the world is employed in this 
way. In the United States, in 1870, out of a population of 
28,228,945 over ten years of age, 12,505,923 were engaged in 
regular occupations. Of these, 2,684,793 (1,618,121 males and 
1,066,672 females) were employed in personal or professional 
services, including 2,053 actors, 43,874 clergymen, 975,734 
domestic servants, 5,286 journalists, 40,736 lawyers, 62,383 
physicians and surgeons, 126,822 teachers, and 1,031,666 
whose field of labor was not specified in the returns. More 
than one fifth of the working force of the country was employed 
in these various services. The proportion is largest where 
wealth most abounds. The poor are compelled to be their own 



150 POLITICAL ECONOMY. 

servants, except as they are served by their children. If the 
services of children under ten years of age were counted in, 
our aggregate would be swelled still higher. 

Among the service workers may be counted, also, many es- 
tabhshments and business companies, the whole or a portion of 
whose occupation is to render immediate personal gratification. 
Such are the theaters, the public shows of all sorts, concerts, art 
galleries and museums, and also steamers, railroads, and public 
carriages, when used for simple pleasure excursions. When 
these latter are employed in the transportation of goods or 
laborers, they add to the economic value of such goods and 
labor ; but, in pleasure excursions, the transportation is a simple 
personal gratification or aid to such gratification, and consumes 
value but produces none, except in the indirect way before 
described. 

151. Prices of services. — The prices paid for the different 
classes of services follow the laws of material values. In com- 
mon household and personal service, the element strength 
enters largely, and that of skill less; and the skill required is 
usually of a low order. Such services would ordinarily, there- 
fore, command only moderate wages were there no disturbing 
causes. Servants who attain higher skill, and prove themselves 
especially trustworthy, gain much higher wages; and expert 
cooks sometimes win salaries equal to the best paid to the 
learned professions. 

Lawyers, physicians, teachers, and other intellectual laborers 
are supposed to require special knowledge and technical skill, 
and their service is accordingly held as of higher value than 
merely manual service. When by extraordinary study or emi- 
nent talent they rise to rare excellence in their calling, their 
services are valued accordingly. 

The laws of demand and supply apply to services as well as 
to goods. Whenever, by reason of the supposed ease, popu- 
larity, or other advantages of any professional calling or class of 
service, it becomes overcrowded, the work of such calling or 



SERVICES. 151 

class falls in the market, and the wages go down. So, on the 
other hand, if any field of service comes to be counted as dis- 
agreeably laborious or degraded, and a consequent scarcity of 
such service prevails, the demand raises the price as far as the 
actual need of such service will allow. This will explain many 
cases which are ordinarily counted as anomalous, especially in 
the employments of women whose range of work is smaller 
than that of men, and who are much more sensitive to the 
esteem in which their business is held. They crowd the pro- 
fessions which are open to them, or those which they deem it 
respectable to enter, as the teachers' calling, and, by their own 
crowding and competition, lower the wages to their own sex. 
An enlargement of the sphere of work open to and respectable 
for women, will tend to equalize wages between men and 
women. 

Large amounts of service are gratuitous, being done by 
friends for friends; parents for children, or children for parents; 
but as this does not enter into the field of economic science, it 
need not be considered. 



CHAPTER XIV. 



ORGANIZATION OF LABOR. 



152. The three stages of organization. — Labor has 
thus far been seen in its factors and in its classes. It remains 
to study it in its organization and in its economic conditions. 
It is to be kept constantly in mind that in these chapters labor 
is treated purely as an economic force; and that all questions 
of the rights and social reladons of the laborer are reserved to 
the field of Social Science. The question here concerns the 
methods and amount of work. 

The phrase "organization of labor" has been applied, by 
sociaUsts and others, to the combination or organization of 
laborers, and not for the purpose of promoting their laboring 
power and productiveness, but for mutual aid and protection. 
This organization is aside from the present discussion, and will 
find its place in Social Economy. 

In the history of the industries, labor presents itself under 
three broadly-marked stages of organization: 

1. Sohtary or undistributed, in which each laborer does all 
kinds of work. 

2. Divided into trades and distinct employments. 

3. The division of labor, or its distribution by processes. 
These follow each other in a regular and historic order; but 

they may often be found coexisting in the same times and in 
the same country. 

153. First stage. — Undistributed labor. — The first form 
prevails chiefly in the savage and nomadic states of society, in 

(152) 



ORGANIZATION OF LABOR. 153 

which each man builds his own hut, makes his own weapons, 
dresses the skins for his own clothing, and hunts his own food. 

The only organization of labor in such a state, is the simple 
massing of laborers — several hunters uniting in the same hunt, 
or several herdsmen tending the united herds — where all are 
engaged in the same work, and where they seek, by union, 
only the advantage of numbers and of combined strength. 

In this stage, the labors are necessarily simple; the skill re- 
quired is small, and the products are rude in character and litde 
in amount. The laborers rarely attempt any thing more than 
the supply of present physical wants. Nothing is stored for the 
future, except the meager food supplies for the coming winter. 
The notion of property is imperfectly recognized; community" 
of land and most other goods prevails, and capital, as a pro- 
ductive agency, is unthought of. Each shares with others 
whatever he has acquired, or takes by force or stealth whatever 
he wants. 

154. Labor of savages. — The fitful and feeble efforts of 
the savage can scarcely be called labor. Without skill or steadi- 
ness, these spasmodic and lazy efforts give slight hint of that 
magnificent and enduring force of civilized labor which feeds 
and enriches the great states and empires of enlightened men. 

The tools of this stage are restricted to the rude hatchet and 
knife of flint, the spears, bows, and arrows used alike in war 
and the hunt, and a few other rude implements shaped from 
wood, stone, or bone, or from the skins or horns of the ani- 
mals they kill. These are the only aids which labor seeks from 
the mechanic powers in the savage state. 

The toil is spent chiefly in gathering nature's free gifts, and 

little attempt is made to increase or improve them. A thou- 

• sand acres of land, in temperate climes, yields food for a single 

man, and famines often drive the starving inhabitants to seek 

provisions by invading the haunts of other tribes. 

When labor advances from hunting to herding, food becomes 
more abundant, or at least more constant; but labor, though 



154 POLITICAL ECONOMY. 

more regular and productive, remains chiefly in the first or un- 
distributed form. Each laborer performs all kinds of work 
required by his wants, and rests content with what he thus 
procures. 

The pioneers in our own western wilds have sometimes been 
temporarily reduced to this stage of labor, and compelled to be 
their own carpenters, tailors, and shoe-makers — a sort of jack- 
of-all-trades ; with the disadvantage of civilized needs, and the 
compensating advantage of much of the knowledge and some 
of the tools of civilized men. 

155. Steps of progress. — By what slow steps the different 
trades and employments separated from each other, and from 
the general work, is not definitely known; nor would such 
knowledge specially aid economic science. It is easy to con- 
jecture how the special aptitude of some savage genius might 
have led him to improve upon the common form of some 
weapon or implement, and caused his productions to be looked 
upon with eager desire by his less skillful contemporaries; and 
it is obvious that they would, in their desire for the possession 
of the improved weapon, offer him in exchange an equivalent 
from the fruits of their hunting. He would, perhaps, teach his 
son or other youths his art, and so a trade would have begun. 
A French engineer, who had been for seven years a prisoner 
among the Apaches, while still in their most savage state, told 
the writer that the stone arrow-heads and hatchets, still in use 
by them, were made by a few members of the tribe who had 
learned the trade. We read that the antediluvian Jabal "was 
the father of such as dwell in tents, and have cattle." He was 
the first, perhaps, to domesticate the wild animals, and to tend 
them in the pastures in which he had erected the tents con- 
structed from their hides or hair. His brother Jubal .' ' was the • 
father of all such as handle the harp and organ" — the first to 
get musical sounds from stretched strings and the hollow reeds. 
Their cousin. Tubal Cain, was ' ' an instructor of every artificer 
in brass and iron." 



ORGANIZATION OF LABOR. 155 

In other cases, the surroundings of the tribe would lead to 
the development of some form of industry ; as dwellers by the 
sea would naturally learn fishing and boat-building and the sail- 
or's arts. Arts once started by one tribe are easily borrowed by 
others and added to their own, and thus, from various sources, 
different employments grow up. 

156. Second stage. — Division of employments. — The 
separation of employments may be counted the first grand step 
in civilization, as it was the first in true economic progress. It 
implies, as its necessary condition, the notion of private prop- 
erty and that of the exchange of goods. Without these, the 
maker of arrows must still continue to be also a hunter. He 
can only devote himself to arrow-making when his products are 
recognized as his property, and when he can procure in ex- 
change for them the food he needs. 

So soon as men began to devote themselves to distinct and 
separate employments, skill increased, and better tools were in- 
vented. Out of these came increased production, and, by de- 
grees, a surplus of products finally appeared, wealth began to 
accumulate, stimulating into life heretofore unknown desires, 
affording leisure and materials for new manufactures, and bring- 
ing into action higher mental and physical energies before 
dormant and unsuspected. 

The division of employments once begun, its manifest advan- 
tages, in more abundant production and in improved products, 
would surely maintain it. Men, finding that for half the toil 
they could win double the amount of goods, would never again 
return willingly to the old form of undistributed labors. Hav- 
ing started, trades would naturally continue to subdivide, as 
wealth increased and demands multiplied. The workers in 
wood, who at first went to the forests for their materials, be- 
come divided, finally, into choppers, lumbermen, sawyers, car- 
penters, joiners, cabinet-makers, coopers, boat-builders, chair- 
makers, and a score of other trades, and these again into 
special branches of each, till every branch devotes itself to the 



156 POLITICAL ECONOMY. 

production of a single class of goods. So the house-builders 
subdivide into the carpenters, the stone-masons, the brick-lay- 
ers, the plasterers, the painters, glaziers, plumbers, decorators, 
and many others. The metal-workers, the clothiers and cloth - 
makers, the leather workers, and the food producers, followed 
the same law, as civilization advanced, till the distinct trades 
were numbered by hundreds. 

157. The two stages contrasted. — This second stage in 
the organization of labor differs from the first in the narrower 
field in which each labor group worked. Under the first 
stage, the labor group is simply a mass of laborers of all work ; 
under the second, the groups divide from each other by dif- 
ference of employments, and the entire field of labor is divided 
into as many separate labor groups as there are different trades 
and vocations. 

But, while the sphere . of labor grew relatively narrower, by 
this subdivision of trades it grew really much larger for each 
group. The all-work of the savage is much less in amount and 
variety than the single employment of the civilized man. The 
tools and processes of the house carpenter outnumber all the 
implements and processes known to savage life ; and the skill 
required in building a modern house is twenty times that re- 
quired to perform every labor which savage needs demand. 
Seven years was the commonly allotted time, a few years since, 
for the apprentice to learn his trade ; and in Europe he was 
usually required to spend two or three years more, as a travel- 
ing or journeyman laborer, working in the shops of other cities 
and provinces, and thus perfecting himself in his craft, before 
he could open a shop of his own and offer himself as a master 
workman. The spread of education, and the increase of popu- 
lar intelligence, have diminished the time of apprenticeships, 
but the learner of a trade must still give years to his work be- 
fore he can master it in all its branches and processes. Work- 
men of the highest skill are rare in all the trades and pro- 
fessions. 



ORGANIZATION OF LABOR. 157 

158. Advantages of division of employments. — The 

advantages gained by this organization of labor into different 
trades and professions were many and important: 

1. It allowed men of different aptitudes to choose work suited 
to their talents and their strength. 

2. It greatly increased the skill of labor, and thus improved 
its products. In the place of huts came houses; instead of the 
rough dress of skins came the soft, warm, and flexible fabrics 
of the looms; and in place of the scant meal of flesh, or of 
parched corn, was spread the full, rich table of civilized hfe. 

3. It vastly multiplied and cheapened goods. Ten laborers, 
each working at a single trade, produce at least ten times as 
much as the ten could produce when all worked at all the 
trades. 

4. It led to the invention of new trades, new tools, and new 
goods. This has already been sufficiently illustrated. 

5. It increased the means of subsistence, and made it possible 
to sustain, in plenty, large populations, where feeble tribes 
roamed and starved before. 

6. Increasing the skill, wealth, and numbers of mankind, it 
increased also the civilization and general well-being of peo- 
ples, raised them from the nearly brutal condition of the savage 
to be dwellers in cities, and to the sanctities of homes. 

159. Mutual dependence or cooperation. — It may seem 
at first a disadvantage that the introduction of trades largely 
increased the dependence of men upon their fellow-men. Man 
was no longer equal to the supply of all his own wants. He 
depended upon the shoemaker for his shoes, upon the hatter 
for his hats, upon the various house building trades for his 
dwelling, and upon a host of other employments for the daily 
necessaries of his life. But, on the other hand, it may be 
equally affirmed that the existence of all these trades makes it 
possible for him to receive the aid of so many of his fellow-men. 
The hatter, by his trade, becomes of importance to all who 
wear hats; and they all in turn are ready to give him the 



158 POLITICAL ECONOMY. 

benefit of their skill in exchange for his. This mutual inter- 
dependence of men has increased man's security from want, 
and has made society both possible and necessary. 

The extent of this dependence and cooperation will be better 
seen, if we reflect upon the help a single trade receives daily 
from other trades. In order that a hatter may make a single 
fur hat, the carpenter must build his shop, for which the glass- 
maker, the lumberman, the lime-burner, the brick -maker, the 
lock-smith, the iron-founder, and a hundred others must fur- 
nish materials or products; the cabinet-maker, chair-maker, and 
others must provide furniture; and the machinists, cutlers, and 
other tool-makers must fabricate his implements of labor. In 
the distant wilderness the trapper has caught the beaver, the 
fur-trader has brought it to his door, and the furrier has pre- 
pared it for his use. In other lands, the sheep farmer has 
reared the sheep and shorn the wool, cotton planters have 
raised the cotton, silk producers have fed the silk-worms and 
gathered the cocoons, and silk weavers have woven the silk for 
band and linings ; herdsmen, butchers, tanners, and leather 
dressers have provided the strip of leather needed for the 
sweat-band; ship-builders, sailors, railroad builders, workers and 
managers and traders by the score, exporters and importers, 
have contributed to the collection of his materials, tools, and 
suppHes from the four quarters of the globe. By the help of 
all these he has produced his hat. Shall we call it the depend- 
ence of the hatter upon the rest of mankind ? Or, do they serve 
him that he, in turn, may furnish them with light, tasteful, and 
comfortable covering for their heads? 

160. Third stage. — Division of labor, — The third and 
last stage in the organization of labor is that known as ' ' the 
division of labor." It advances beyond the division into 
trades, and separates the work of each trade into its distinct 
processes, assigning each process to a separate worker. 

This advance seems natural and easy, but it is one of the 
most important in the history of the industries, and its eco- 



ORGANIZATION OF LABOR. 159 

nomic consequences are not yet fully revealed. Adam Smith 
was the first to point out the real nature and power of this 
form of the organization of labor, and to enumerate its limita- 
tions and advantages ; though he failed to discriminate carefully 
between the division of trades and the division of labor. Even 
Roscher does not notice this important distinction. Since his 
time, the subject has been more widely discussed by economists, 
and volumes of illustration have been written to show its im- 
portance. A simple statement will make it clear to the young 
reader. A wagon-maker, working at his trade, makes a wagon. 
From the turning of the hub till the last stroke, he does it all. 
But in doing this he uses a large number of tools, and performs 
an equally large number of operations. Suppose this number 
of different operations to be fifty ; then, in a large wagon man- 
ufactory, employing at least fifty men, and making great num- 
bers of wagons of the same kind, each laborer would, in a 
proper division of labor, perform only one of the fifty opera- 
tions. One would turn hubs, another would mortise them, a 
third would make spokes, a fourth fellies, a fifth axles, and so 
on through the whole work. No one laborer would make a 
wagon ; but each would do the fiftieth part of the work, and all 
together would make complete wagons. In Adam Smith's day, 
sixteen workmen were employed in making a pin. "In pres- 
ent England, the manufacture of watches is divided into 
one hundred and two branches, which have to be specially 
learned." 

161. Advantages of division of labor. — The economic 
importance of this subject arises from the enormous productive- 
ness which the division of labor has lent to the modern indus- 
tries. The division of trades added immensely to the produc- 
tive power of human labor ; but the division of labor has carried 
this power as much beyond that of the ordinary trade-worker 
as his was beyond that of the savage. Adam Smith states that 
in a pin manufactory which he visited, ten men produced 
48,000 pins a day, while each man, working alone, could not 



i6o POLITICAL ECONOMY. 

probably, have produced more than twenty pms a day; and 
the ten working together, without any division of the labor, 
would have made only two hundred. 

To explain this increase of productive power, it is necessary 
to notice, in detail, the advantages springing out of the division 
of labor. It will be observed that some of these are the same 
in kind as those which were found in the division of trades and 
employments; but the division of labor carries these advantages 
to a much greater height, and adds others not known to the 
trades. 

These advantages embrace: i. The economy of time. 2. 
Economy of strength. 3. Economy of skill. 4. Economy of 
tools. 5. Economy of materials and supplies. 6. Improve- 
ments in tools and machinery. 7. Improvements in products. 

8. Multiplication, diversification, and cheapening of products. 

9. The massing of labor and capital. 

162. Economy of time. — The ordinary mechanic, or trade 
worker, as we shall call him, necessarily loses time in passing 
from one branch in his work to another. His work-bench is 
to be cleared, tools exchanged, and new materials obtained. It 
amounts to but little with a solitary worker, but in large opera- 
tions the aggregate is sufficient to be of importance. All this 
time is saved by keeping each laborer employed constantly with 
one tool or set of tools, and one process of labor. Where sixty 
men are employed, the savings of five minutes a day by each, 
is the saving of five hours by all — a small matter in itself, but 
not small when the work of a great establishement is taken into 
account. And the saving, in fact, is usually much more than 
five minutes for each laborer. The trade-worker is more than 
ordinarily careful and diligent who does not lose twenty min- 
utes a day with his various interruptions. 

To count properly the value of time in a great manufacturing 
enterprise, it must be remembered that all the expense for capi- 
tal employed, for machinery and power, for rent, warming, 
care and repair of buildings, for superintendence, and for all 



ORGANIZATION OF LABOR. i6i 

the agencies of purchase and sale, must go on, whether the 
working time is ten hours or fifteen minutes less. The manu- 
facturers of France gain an important advantage by running 
their mills fourteen hours a day in place of the ten hours, usual 
in the factories of this country. 

163. Economy of strength. — The trade-worker must have 
strength equal to the heaviest part of his task. For the lighter 
parts his strength is often much more than sufficient; they 
are child's play to him. In the division of labor, each pro- 
cess is assigned to a different laborer, and the lighter parts 
are given to women and children; and as the children are 
equal, in this light work, to strong men, they may be counted 
as men in the labor force. Thus, a man and four boys are not 
unfrequently equal to five men, while their cost is not more 
than that of three men. In the great cotton and woolen mills, 
a large part of the work is done by young -women and children. 
In the cotton mills of England, in 1874, out of 440,336 persons 
employed, 65,979 (33,342 boys, 32,637 girls) were under thir- 
teen years of age; 37,016 males between thirteen and eighteen, 
and 227,092 females over thirteen were employed. The aggre- 
gate labor force of the world is increased by so much as is 
saved of man's strength, and by all that is added of the other- 
wise unused power of boys and girls. Only economic effects 
are here taken into account ; the moral and social questions of 
the employment of women and children, in workshops and 
mills, belong to another science. 

164. Economy of skill. — This is found both in the easier 
production of the skill demanded and in its better employment. 
In a trade, the workman must learn all the processes and ac- 
quire the use of all the fools. In the division of labor, each 
laborer learns but one operation and the use of the tools neces- 
sary to perform it. This he not only acquires in a short time, 
but he attains in it a skill and rapidity of movement impossible 
to one who must do many different things. The hands of ex- 
pert workers, even of children, move with a swiftness and pre- 

P. E.— 14. 



1 62 POLITICAL ECONOMY. 

cision utterly incredible to one who has not seen them at their 
work. The rapid play of the fingers of a skillful pianist may 
be taken as a familiar instance of the power that may be gained 
by practice. In this^ as in the manual movements of expert 
workers, the eye can not follow the motions. Roscher says 
that a clever filer makes two hundred strokes in a minute. 
Skillful folders and gatherers, in a book bindery, work with a 
swiftness which almost defies observation. Adam Smith attrib- 
utes to this expertness gained by the division of labor, the 
greater part of its large productive effects. 

But there is a second economy of skill made possible by the 
division of labor. In every manufacture there are some pro- 
cesses requiring the highest skill and inteUigence ; but there are 
others in which skill of the lowest order is sufficient. This 
form of the organization of labor allows the assignment of the 
former to the most experienced and skillful workmen, and the 
latter to mere novices, who could not otherwise be employed, 
and whose services are of little cost. It is said that the manu- 
facture of English needles demands, on the part of workmen, 
degrees of skill so different that their pay varies from six pence 
to twenty shillings per day. 

165. Economy of tools. — Here again, as in all the former 
cases, the comparison is made not with the labor of the savage, 
but with that of the trade worker. It is evident that a single 
wagon-maker, working alone, must have all the tools and ma- 
chines necessary to make a wagon. If now, by the division of 
labor, fifty men, as before supposed, are employed in making 
the wagon, the same tools and machines would serve them all, 
except such common tools as may be required in all the 
processes. 

This economy of tools increases in importance as the ma- 
chines employed become large and expensive. It is related 
that the pointed screw manufacture was once saved from ruin 
by employing a second set of men to run the costly machinery 
at night, and thus make it do double work. The cost of screws 



ORGANIZATION OF lABOR. 163 

was so much reduced by this saving in machinery that they 
outrivaled in cheapness the old-fashioned screws, and gained a 
lodgment in the market. 

With the economy in tools may be counted in, also, econ- 
omy in shop-room and other necessary adjuncts of any man- 
ufacture. The shop-room required for fifty wagon-makers and 
their machinery is not necessarily more than five times as 
large and costly as that required by one man doing all. The 
stoves, water-pipes and cisterns, carts, yards, store-rooms, and 
counting-room would require little larger increase of capacity. 

If power machines, such as the steam-engine or water-wheel, 
are employed to run the working machinery, the economy be- 
comes still greater, as it costs nearly as much to run a small 
engine as one of ten times its power ; and the expense of run- 
ning it for an hour or two is not very much less than that of 
keeping it continually at work. 

166. Economy of materials and supplies. — The pro- 
vision of materials and various supphes is one of the foremost 
cares, and, usually, one of the largest sources of expense, to the 
manufacturer. These must frequently be imported from distant 
markets, and laid in in such quantities as the extent of the 
business demands. Our single wagon-maker might need all 
the variety of materials required by his neighbor who employs 
fifty workmen ; but his expense in obtaining his stock would be 
vastly greater in proportion to the amount purchased. He 
would buy at retail, while the other would get his at wholesale. 
But the economy would only begin here. His waste in cutting 
up would be twice as large in proportion to the amount of ma- 
terial used, as that of the other. The very fragments from a 
large establishment, by their bulk, pay for saving and applying 
to some use ; those from the shop of a single workman will not 
compensate for the care. It is this economy of materials that 
helps to render ready-made clothing and shoes cheaper than 
the custom-made goods of the same quality. 

167. Improvements in tools and machinery. — In this 



1 64 POLITICAL ECONOMY. 

we approach the very heart of that marvelous producing en- 
ergy which the division of labor has lent to the modern 
industries. The separation of a complex work into its simple 
elementary processes, is the primary condition of the invention 
of a machine for doing the work. Given any single motion, 
and the machinist easily devises the machine to produce it. 
The problem before Arkwright, in his invention of the spinning- 
jenny, was simply to draw out slowly a roll of cotton while the 
spindle was twisting it. He thought of two pairs of small roll- 
ers, through which the roll of cotton might pass, and by making 
the last pair roll a little faster than the first, his problem was 
met, and the cotton manufacture was revolutionized for all 
time. Nearly all the great inventions have been made pos- 
sible by this division of labor into its simple processes. The 
first result has been to increase the skill of the human hand 
in performing them; and the second step has been to make 
a hand of steel to do the work of the skilled hand of 
labor. 

In Adam Smith's day the chief effect of the division was that 
which he has so well described — the wonderful expertness of 
laborers. Were he to revisit, to-day, his pin manufactory, he 
would look in vain for his ten expert workmen, making, by 
their division of labor, 48,000 pins a day. In their place he 
would find two machines, to one of which is fed wire which it 
turns out completed pins; and the other, fed with pins and 
paper, produces neatly arranged papers of pins. 

Every-where the final resillt has been not skilled workers, but 
skilled machines. The hundred and two men who made the 
parts of a watch are gone, and a score of machines make 
watches so much faster and better than even the division of 
labor produced them, that the combined watch-makers have 
been driven from the field, as the old solitary watch-maker was 
driven out by them. 

A new form of skill has come into demand — the skill to 
manage and tend machines. And in this the division of labor 



OR-GANIZATION OF LABOR. 165 

continues; each operative learns to manage or attend one form 
of machine, to feed it with its raw material, to correct it when 
it goes astray, and to take from it the work when done. 

168. Improvements in products. — No one who has 
taken pains to make the comparison will deny that the best 
goods made to-day are better than the best that were made a 
half century ago. Doubtless, many poor and deceptive goods 
are made now as they were made then; and there were, in 
those days, hand-made fabrics of certain kinds whose honest 
soHdity and strength may defy competition; but, in general lines 
of goods, comparing the best with the best, a great improve- 
ment has taken place. This improvement has sprung from the 
division of labor, and has arisen from three sources : i . The 
finer skill of the workers or of the machines; 2. The in- 
vention of better forms and construction; 3. New and better 
materials. 

A Swiss commissioner, reporting to his government on the 
American watch manufactories, which are pressing the poor 
watch-makers of Switzerland with so sore a competition, con- 
fessed that the watches made by machinery are uniformly better 
than those made by hand-labor. Our books, our clothes, our 
furniture, our stoves, our wagons, our plows, and our tools and 
implements of all kinds are both more convenient and more 
beautiful than those used by our fathers. 

169. Multiplication, diversification, and cheapening 
of products. — The increase of products of labor, by this or- 
ganization of labor, has already been sufficiently shown. The 
extent of this increase can only be measured by those statistics 
which tell of the growing manufactures, commerce, and agricul- 
ture of the great civihzed nations. Every-where the populations 
of Christendom are multiplying, but the wealth is multiplying 
still faster. This increase of manufacturing will be best seen 
by noting a few examples of staple goods. The following 
tables will show the growth of the cotton and wollen manufact- 
ures of England in twenty years : 



i66 



POLITICAL ECONOMY. 



YEARS. 


SPINDLES. 


LOOMS. 


COTTON USED^ POUNDS. 


PERSONS 
EMPLOYED. 


1850 
1870 


19,173,969 
32,613,631 


223,626 
411,336 


588,200,000 
1,078,200,000 


291,662 
414,970 


Increase, 


13,439,662 


187,710 


490,000,000 


123,308 



Woolens. 



YEARS. 


SPINDLES. 


LOOMS. 


WOOL USED, POUNDS. 


PERSONS 
EMPLOYED. 


1850 
1870 


1,356,691 
2,081,931 


9,170 
37,356 


Unknown. 
Unknown. 


64,426 
100,640 


Increase, 


725,240 


28,186 




36,214 



Worsteds 



YEARS. 


SPINDLES. 


LOOMS. 


WOOL USED, POUNDS. 


PERSONS 
EMPLOYED. 


1850 
1870 


864,874 

1,766,636 


32,617 
63,443 


Unknown. 
Unknown. 


78,915 
103,514 


Increase, 


901,762 


30,826 




24,599 



The increase of the cotton manufacture in the United States, 
during twenty years, was as follows : 



YEARS. 


SPINDLES. 


LOOMS. 


COTTON USED, POUNDS. 


PERSONS 
EMPLOYED. 


i860 
1880 


5,235,727 
10,921,147 


126,313 
230,223 


422,704,975 
729,781,260 


122,028 
181,628 


Increase, 


5,685,420 


103,910 


307,076,285 


59,600 



ORGANIZATION OF LABOR. 167 

The increase in the variety of products is even greater than 
the increase in amount. The ingenuity of man has been kept 
on the stretch to discover new forms of products and new ob- 
jects of desire, in order to give employment to labor and to 
find new sources of wealth. Novelties in fabrics and in ma- 
chinery are constantly appearing, sometimes displacing older 
forms, but more frequently adding to them, and steadily in- 
creasing that division of labor from which they spring. 

The cheapening of products comes naturally from the in- 
crease of supplies; but it grows also, and more largely, from 
the easy and immense productiveness of the new methods of 
manufacture, and from the diminished need of skilled labor to 
be bestowed on each article made. In order that the vast in- 
crease of production may find room for its goods in the mar- 
kets, the demand for consumption must be as largely increased, 
and hence the efforts of manufacturers are steadily bent in this 
direction. The rapid diminution in the price of cotton yarn 
has been already noticed. From 1786 to 1876, a period of 
ninety years, it fell from 38s. a pound to 2s. lod. Other 
goods have experienced a similiar if not an equal fall. 

170. The massing of labor and of capital. — Among 
the most conspicuous and significant results of the division of 
labor has been the collection of large bodies of workmen to- 
gether in the same establishments, and of course a correspond- 
ing massing of capital. It is not now uncommon to find from 
500 to 5,000 operatives employed in the same mill. From 
i860 to 1870, the cotton mills diminished, in number, from 
1,091 to 956; but the number of persons employed increased, 
in the same time, 13,341, and the capital employed increased 
$42,121,031. In England, from 1861 to 1870, the mills, or 
factories, diminished from 2,715 to 2,371; and the persons 
employed increased from 407,598 to 414,970. 

This massing of labor and capital favors production by the 
more complete and systematic organization of the labor groups, 
by the more thorough discipline, both necessary and possible, 



1 68 POLITICAL ECONOMY. 

and the greater economies in purchase, consumption, and 
sales. 

The steady absorption or destruction of smaller establish- 
ments by larger ones, which is a striking feature of the eco- 
nomic movement of the times, and which prevails through all 
branches of trade and manufactures, is effected by the greater 
economies possible to the larger estabhshments. 

These large establishments also command the markets to 
an extent not possible to the older forms of production. 
The trade-worker found his customers among his neighbors 
and townsmen; the gigantic manufactories seek their markets 
throughout the world. They trade with mankind. 



CHAPTER XV, 

ORGANIZATION OF LABOR CONTINUED. 

171. Disadvantages of division of labor. — That form 
of the organization of labor which we have discussed under the 
name of ''the division of labor," and which, as we have seen, 
has proved so powerful in its productive energies, has also its 
evils and disadvantages. These evils come chiefly from the 
reactions of the system upon the health, and mental and moral 
condition of the laborer. They belong therefore, properly, to 
Social Economy, except so far as they may affect the produc- 
tiveness of labor. 

The disadvantages of the system may be stated as follows : 

1. The injury to the general strength and health of the 
laborer, resulting from his confinement to a single movement 
or set of movements, which must necessarily leave many 
muscles unused. Full health and vigor demand that all the 
powers of the body shall be exercised proportionately. 

2. The performance of a single operation continuously tends 
to narrow the intelligence. The skill acquired is partial and 
one-sided, and soon becomes so nearly automatic as to make 
the man a machine. It thus sacrifices the man to his work. 
Whatever lessens the demand made upon the intelligence of 
any man, to that extent lessens the growth and lowers the 
destiny of the man. 

3. It tends to destroy the interest of the laborer in his work. 

The single mechanic, working alone, sets before his mind the 

image of the article which he proposes to construct. Piece by 
p. E.-15. (169) 



lyo POLITICAL ECONOMY. 

piece he works out its separate parts, and brings them together, 
with a growing interest, as his work approaches completion; 
and at last, when he folds his arms and gazes upon the com- 
pleted fabric, it is with a sweet consciousness of power — a joy 
of triumph — a feeHng of pride in his work. But to the worker 
under a division of labor no such feeling comes. He shapes a* 
single part of some fabric — a wheel, a bolt, a screw \ or he cuts 
mortices, or makes tenons. He never completes an article and 
says to himself, this is my workmanship, the proof and product 
of my skill. If he works with a machine so much the worse. 
The man and the machine stand before each other all day 
long, like two parts of the same thing — the man, for the time, 
almost as much a machine as the thing of iron and wood 
which he tends. All the proper inspiration of labor is gone. 
The nobler motives for work are wanting. Men who have 
learned trades usually work with reluctance in this confined 
way. 

4. The man who has learned only one operation has merely 
the twentieth, or fiftieth, part of a trade. He can do nothing 
away from his associates who have the other parts of the trade. 
He must seek his employment in an estabHshment like that in 
which he acquired his skill. 

All these disadvantages, doubtless, tend to cripple produc- 
tion; but they must not be overestimated. They are compen- 
sated with many advantages, of cheaper goods, and better 
living — with social advantages of the larger society brought to- 
gether, and with all the opportunities of education which it 
favors. Labor is not the whole of fife, and if the factory oper- 
ative lives the other parts of his life well, he may escape much, 
if not all, of the threatened evils of his narrow employment. 

172. Large and small establishments. — The evil of 
the overgrowth of large establishments, at the expense of the 
small ones, the larger swallowing up the less, seems at present 
more formidable, and awakens alarm. The movement may be 
conceived as going on till two or three great merchants shall 



ORGANIZATION OF LABOR, 171 

control all the trade of our great cities — a few gigantic manu- 
factories shall supply the markets with goods — two or three 
railroad kings shall hold the mastery of the railway system of 
the country, and a few Rothschilds or Barring Brothers shall 
hold the money power of the country in their hands. It was 
said that Stewart, the merchant prince of New York, had in 
his employment, as foremen, scores of small traders whom he 
had caused to fail, and whose skill he made subsidiary to his 
own more rapid advancement, while he paid them, as salaries, 
more than they could ordinarily make as profits. 

The question is partly a social and political one, but its eco- 
nomic bearings are important. Leaving out of sight, for the 
present, all unfair and unjust use that these men may some- 
times make of their means to uphold or increase their power, 
it must be admitted that their success depends, finally, on their 
serving the public better than it was served before. Men buy 
of the great merchants or manufacturers because they get better 
or cheaper goods than they can find elsewhere. As soon as 
they shall fail to do better for the public than the small traders 
and manufacturers can do, these will spring up again, and will 
gain the public patronage. 

The competition between the large establishments must con- 
tinue, and this will not only control their dealings with the 
public, but will compel each to use all its accumulated power 
and wealth to advance still further the inventions and improve- 
ments on which they were founded. 

The large establishments do not diminish the demand for 
labor, but rather increase it, by reason of the wider scope they 
attempt to give to the business in which they are engaged. As 
they are less liable to failures than smaller and weaker estab- 
lishments, laborers are, therefore, less liable to lose their wages 
by the bankruptcy of their employers, and the business inter- 
ests of the country are safer from shocks. 

The abuse of power, by great capitalists and traders, belongs, 
like all other violations of the public peace and well-being, to 



172 POLITICAL ECONOMY. 

another department of science to discuss, and to the poUtical 
power to remedy. The great economic laws and the intelli- 
gence of mankind have been found able to solve more difficult 
problems than this as they have arisen in the course of the 
history of labor. 

173. Limits of division of labor. — The division of labor 
has natural hmits, beyond which it can not go : 

1. In the number of processes in any manufacture; for it is 
not an extension of the division of labor to set two men to 
perform one operation. 

2. In the demand for the goods; for, if ten men can pro- 
duce all the goods required, no more can be profitably em- 
ployed, though the operations may number twenty or more. 

3. In the capital of the enterprise; since no man can employ 
a hundred men if he has not the means to provide machinery, 
buy material, and pay wages for more than twenty. 

The division is evidently more limited in some employments 
than in others. In agriculture the operations are comparatively 
few, and are not cotemporaneous. Seed sowing and harvesting 
can only be done in their seasons. In house-keeping some 
division is practiced in large households, and more is possible 
if baking, laundry work, and some other work is sent outside 
the house. In mining, commerce, and mercantile enterprises 
a wider division is possible; but the widest application of this 
form of organization is to be found in the manufacture of those 
goods which are most complex in character and which involve 
the largest variety of operations in the making. 

174. Division of intellectual labor. — Division of labor 
is applicable to intellectual employments as well as physical. 
Dr. Wayland gives an interesting account of its use in calculat- 
ing the tables made under the direction of the French govern- 
ment to facilitate the introduction of the metric system of 
weights and measures. Three grades of mathematicians were 
employed ; the first class embraced five or six of the most emi- 
nent mathematicians, who sought the best analytical formulae 



ORGANIZATION OF LABOR. 173 

for the work ; the second class comprised seven or eight of less 
ability, who interpreted these formula into numbers; and the 
third consisted of sixty or eighty arithmeticians who made up 
the tables. 

A useful division of labor is made between the members of 
the editorial corps of the great daily papers. A managing edi- 
tor, a political editor, a commercial editor, a literary editor, a 
city editor, and writers on agriculture, on education, on house- 
hold art, and on other topics, — all have their separate work 
assigned them; and the daily issue is the product of the work 
of all 

The modern graded school is another example of the use 
of division of labor in an intellectual pursuit. A superintend- 
ent or principal manages the whole and lays out the work. 
Then separate teachers are employed for the primary, the sev- 
eral intermediate, and the high school grades. This is the 
common form of organization. A better and more philosoph- 
ical division of the labor would be to assign to one teacher the 
reading classes, to another the writing, to another the drawing, 
to another the arithmetic, to another the grammar classes, and 
so on through the whole course, letting each teacher teach his 
own branch through all the grades as far as he has time. This 
division already prevails in the high schools, colleges, and uni- 
versities, and is indispensable to their work. 

The division of labor may be used, to some extent, in the 
work of scientific investigation, where wide fields of experiment 
and observation are to be occupied. Indeed, the subdivision 
of science into its branches, almost daily more numerous, is a 
natural division of the work of investigation. 

175. Nature's division of labor.— There is a sort of 
natural division of labor, between different countries, and differ- 
ent parts of the same country, produced by differences of soil, 
climate, and situation. Thus, China cultivates tea; the East 
Indies, spices; the West Indies, sugar; Brazil, coffee and cattle. 
The Northern States of our own country raise wheat and corn ; 



174 POLITICAL ECONOMY. 

the Southern States, cotton and tobacco. But this is rather a 
division of industries than a division of labor, and is confined 
mostly to agriculture, and to the collection of the natural prod- 
ucts of the climate and soil. These circumstances of cHmate 
and situation, except in the extreme cases already noticed of the 
torrid and frigid zones, have Httle necessary influence on manu- 
factures. No one, looking on the map of Europe, a thousand 
years ago, would have selected Great Britain as the work -shop 
of the world; and yet, by the genius and enterprise of its peo- 
ple, aided by the folly of their neighbors, which drove the in- 
dustrious artisans of the Netherlands and the silk-weaving 
Huguenots of France to its shores, Great Britain has led the 
world in the field of manufacture. Her insular position prop- 
erly marked her as the home of a commercial people, but with- 
out the wealth and the carrying trade of her manufactures, her 
shipping might have been confined to fishing fleets and the few 
merchantmen employed in bringing her supplies from more 
favored lands. Her climate, softened by the warm waters of 
the Gulf Stream, and her coal-beds and iron-mines discovered 
in good time, have aided her to overcome other difficulties of 
position ; but to supply her giant mills and their operatives, she 
has had to bring wools from Spain, Germany, the Cape, and 
Australia; silk from Italy and China; cotton from India, Egypt, 
and the United States ; timber from Maine and Canada ; bread- 
stuffs from America and the Levant; and other materials and 
food supplies from the four quarters of the globe. Agriculture 
may be provincial, but mechanic art is cosmopolitan. It may 
flourish wherever human skill can do its work. 

176. Division of labor between establishments. — 
There is a stage in the division of labor, now becoming preva- 
lent, in which the processes are distributed to establishments 
rather than to men. Thus, in wagon-making we have manu- 
factories devoted to the production of wheels, others which 
produce carriage bodies, others which furnish the iron-work, 
and others still which make the bent wood-work for thills. 



ORGANIZATION OF LABOR, 1 75 

carriage tops, and wheel rims. In each of these establishments 
there is a further division of the labor among the operatives. 
The law of productiveness, for the laborer, or for the es- 
tablishment, seems to be that the fewer and the simpler the 
processes undertaken, and the larger the amount of labor and 
capital invested in actual use, the greater the facility and 
cheapness of the production. There must of course be a limit 
beyond which this law will not continue operative, but this 
limit has not been often, if ever, reached. 

177. The laws of value in the division of labor. — 
The principles of value, described in former chapters, underlie 
and control the division of labor, as they do all other phe- 
nomena in economic science. As the aim of all labor is to 
produce values, or value-bearing goods, either for the personal 
use of the laborer, or for exchange for other goods, so the 
aim of all organization of labor must be to facilitate and in- 
crease that production — but to increase it with the least ex- 
penditure of valuable materials and of costly agencies. To 
produce goods which, all things considered, have no more value 
than those used up in the process of production, would leave 
no profit — the motive for production. The larger the excess 
of value in the new product, the larger the profit of the manu- 
facturer. By the division of labor, the manufacturer secures 
the same amount of products for a less expenditure in skill, 
strength, machinery, and materials; or, more frequently, ob- 
tains a vastly greater product for each equal amount of expense. 
The fall in the price of his goods lessens his profits, but the 
enormous increase of his production still leaves him the gainer. 
So long as the values produced exceed the total values con- 
sumed in the act of production, his enterprise is successful. 

178. The three stages compared. — These three great 
forms of the organization of labor — the solitary or undistributed, 
the division of trades and employments, and the division of 
labor — are only stages in the evolution of industry from the 
simple to the complex, from the savage man to the civilized — 



176 POLITICAL ECONOMY, 

from the sparsely peopled wild to the crowded populations of 
great cities and states — from the childhood of man and society, 
with its narrow life and its few wants, to the mighty maturity 
of peoples and empires, pushed by the power of a myriad of 
desires, and crystallized into complex and wide-reaching social 
and economic organizations by the differentiating and compell- 
ing force of a myriad needs and aspirations. 

In the first form, man is dependent upon nature — he does 
but little except to gather nature's products. In the second, he 
conquers nature, using her gifts as material on which to impress 
his own will. In the third, he attains the mastery of nature, 
compelling her forces to do his bidding, and substituting her 
powers for his own. 

Looked at economically, the values produced by the first are 
large in the element of utility, but small in the element of 
effort; in the values produced by the second, the element of 
effort is large and the element of utility is relatively less; in 
the third, the values are equal in utility and in effort. 

To state these facts in the more familiar terms of purchase 
or exchange — we estimate the goods of the first class by their 
power to benefit us, thinking little of the effort which they may 
have cost. We care not how much trouble the hunter had to 
catch his game ; it is the utility we discover in the venison 
steak, or in the buffalo-robe that we are willing to pay for. 
We estimate the goods of the second class by the labor and 
skill expended upon them; not, indeed, losing sight of the util- 
ity, but giving chief heed to the element of effort — to the 
amount of work the laborer has had to use in their production. 
The trade-worker himself pleads, principally, his toil and skill 
expended as the reason of the price charged. In the beautiful 
machine-made goods of the third form of labor, we consider 
both the usefulness and the producing energy. The beauty 
and utility are so large in proportion to the price, that they 
are easily forced upon the attention as an inducement to pur- 
chase, while the efforts required for the production, though not 



ORGANIZATION OF LABOR. 177 

SO obtrusive as the personal labors of the mechanic, are by no 
means so vague and indeterminate as those of the savage. The 
manufacturer, properly, insists upon his rightful profits. 

179. The future of organization. — It is useless to ask 
whether there remains another and still more efficient organiza- 
tion of labor to be discovered. It is probable that the pathway 
of future industrial progress lies in the direction of the wider 
extension of the improvements already known, and in the ele- 
vation of the laborer in education and personal character. The 
division of labor, though so well known and approved, is not 
yet so widely used as it might be. In the newer and sparser 
populations, the older and less productive forms of labor are 
still in use; and there are large fields of art and industry, in 
which the division of labor is scarcely known at all. 

The invention of machinery goes steadily on, and the in- 
crease of scientific knowledge was never more rapid or more 
promising in practical results. Neither of these movements 
can be stopped or stayed. The alarms so often felt at the 
progress of invention, and the threatened revolutions in trade, 
have heretofore proved needless. The advancing intelligence 
of mankind has been found adequate to solve the problems of 
industry, and, though temporary and local disaster has some- 
times followed a sudden change of the system of labor, yet the 
final result has been the advancement in the condition of the 
world at large and of the laboring classes. 



CHAPTER XVI. 



CONDITIONS FAVORING LABOR. 



i8o. EfBciency of labor the efficiency of manhood. — 

The discussion of the economic problems of labor would not be 
complete without a statement of the chief conditions which 
favor its growth and efficiency. Some of these have been nec- 
essarily anticipated in their connection with other parts of the 
discussion. 

Wide differences in the working power and productiveness 
of laborers have often been noticed by the managers of labor 
and by the students of economic science. After all his care 
for materials, machinery, and the proper organization of labor, 
the wise manager finds that he must know and meet the other 
conditions on which labor can be led or impelled to its highest 
efficiency. 

The laborer is not a machine whose force can be exactly 
computed by the laws of dynamics. Organize him as we will 
with his fellows ; link him to machinery as closely as we may, 
something still is lacking to his greatest power and efficiency. 
Behind the work stands the worker, and within the worker 
lives the man. The true efficiency of labor is, in the last anal- 
ysis, the efficiency of manhood. Whatever develops, ener- 
gizes, or inspires this manhood, increases the power and dispo- 
sition to labor. The inquiry for the best conditions for labor 
resolves itself, therefore, into an inquiry for the best conditions 
of manhood. 

i8i. First condition, health.— i. The primary condition 
(178) 



CONDITIONS FAVORING LABOR 1 79 

of labor, like that of life, is physical health and vigor. The 
laborer, to do his best, must be well fed, well housed, and well 
clad. Though not a machine, the laborer is, nevertheless, in- 
cased in machinery. His body is a mass of mechanical devices 
pushed by physical force. But it is a living machinery which 
runs, repairs, and regulates itself; and good hygienic and sani- 
tary conditions of food, clothing, and housing are essential to 
its soundness and strength. Brain and nerve power and the 
active and clear intelligence which depends upon them for 
their manifestation, also require physical health and vigor; and 
so both strength and skill demand a good bodily support as 
their first condition of highest efficiency. In the chapter on 
strength as a factor in labor, this has already been shown with 
sufficient fullness. 

182. Freedom a condition of labor. — 2. Liberty is as 
essential to labor power as it is to the highest manhood. The 
superiority of free labor has been asserted by nearly all econo- 
mists, as it is affirmed by all sound philosophy. The labor of 
slaves, serfs, and of all under bondage of any form, is forever 
inferior, and usually unprofitable. It acknowledges but one 
motive, that of servile fear. Slaves can neither choose their 
own employments, nor enjoy as their own the fruits of their 
toil. The great stimulating motives of all modern industrial 
power and progress are wholly wanting to them; and if they 
become so degraded as to no longer feel the need of these, 
they lose their efficiency as they lose their manhood. It would 
be easy to fill pages with citations of testimony against slavery, 
and with proofs of its unprofitableness. Unfortunately the 
history of mankind has been so widely and so deeply stained 
with this crime against humanity, that the evidences of its folly 
lie broadcast over its pages. All the great states and empires 
of antiquity were slave-holding. Athens had no citizen so poor 
that he had not one slave, at least, to care for his house. The 
conquests of Rome filled Italy with slaves taken as prisoners in 
war; and Rome fell, at last, as much from the absence of her 



l8o POLITICAL ECONOMY. 

once free laborers as from the irruption of the barbarians. To 
the savage hordes of the North she could oppose only a popula- 
tion of slaves. The feudal system of Europe, during the dark 
ages, was a system of serfage, and its downfall was the first 
step towards modern progress. 

The degradation of labor and of the useful arts in Greece 
and Rome, caused by resigning them to slaves, was one of the 
most fatal defects in their civilization. The magnificent devel- 
opment among them of the fine arts and of literature which 
they held in honor, shows to what heights they might have 
attained in the industries which have so enriched and elevated 
modern civilization. 

It would be unnecessary now to discuss this condition of 
labor, since slavery has disappeared from Christian lands; but 
it is important to show that whatever in any way restricts the 
freedom of labor, or of the laborer, lessens their efficiency. 
Come from what source it may — whether from restrictive legis- 
lation, or from the rules of trade unions, or from the customs 
of society, or from the public esteem in which it is held, or 
from the personal disabilities of ignorance or vice — whatever 
holds men back from the utmost freedom of their laboring 
powers tends to the destruction of their very force and effici- 
ency as the creators of value. To put a ban upon any proper 
employment, by giving it a bad name, is as serious a bar to 
liberty of labor, in that direction, as slavery itself could inter- 
pose. To give dignity and pubUc honor to labor is to set 
milHons free to work. 

183. Intelligence in labor. — 3. The value of intelligence 
as a condition of efficient labor seems too well established to 
need argument. The power of the cultivated mind to gift even 
the body with energy and endurance has been frequently 
proved in the army, in case of the regiments recruited from the 
schools, and from the more intelligent classes in communities, 
^-113 also in some of the exploring expeditions of the navy. It 
was claimed that the superiority of the German armies, and es- 



CONDITIONS FAVORING LABOR. i8l 

pecially of the Prussian troops, was due to their better educa- 
tion. Doubtless, the mind lends something of its own vigor 
and activity to the body which it inhabits. Many facts seem to 
prove this. 

But the indirect influence exerted by superior intelligence in 
the motives it opens to the laborer, in the greater care it 
enables him to exercise over himself, and in the more skill- 
ful employment of his strength, is much more important in 
promoting the productiveness of labor. The uses of the in- 
telligence in industry have already been discussed in the 
chapter on intellectual labor. We return to it here to put 
it in its place among the conditions on which all efficiency 
in labor depends. 

A simple analysis of the things implied in educated intelli- 
gence will show its necessary effect on labor. 

1. It implies quicker and clearer perceptions of the facts be- 
fore it. It is true that this power is sometimes attained by the 
simple student of nature, and is often missed by the mere stu- 
dent of books ; but however gained, it is the product of cultiva- 
tion, and, in general, the higher the intelligence the keener the 
power of observation, at ^least of the things in which the mind 
is interested. The intelligent workman will see quicker and 
better the qualities of his materials and work than his ignorant 
fellow-laborer. 

2. Intelligence implies larger powers of memory. The mem- 
ory of the educated man is more systematic, and holds its facts 
in a more orderly and trustworthy manner; and this, too, helps 
the laborer, especially in the higher kinds of labor, and in all 
the computations of business. 

3. Education improves the general judgment and the reason- 
ing powers. The man of intelligence sees the relations of 
things in a larger and clearer way, and reasons more wisely 
and safely, both as to the ends to be attained and the means 
of attaining them. He is, therefore, fuller of resources for his 
work, whether it is hand-labor or headwork. 



1 82 POLITICAL ECONOMY. - 

4. The cultivation of the intelligence implies also a cultiva- 
tion of the taste — of the sense of beauty and proportion — which 
must react upon skill in many ways, and thus upon the values 
of its products. 

5. Intelligence imphes, also, broader views of Hfe and better 
conceptions of the rights and relations of men; and, hence, 
increases the moral and motive power of the laborer. It is 
true that it is sometimes perverted, and only serves to inten- 
sify selfishness and to lend cunning to wickedness; but this 
is its perversion, not its natural result. The uneducated de- 
grade labor. It becomes drudgery in their hands, and loses 
as well in public esteem. The educated laborer honors his 
work, and makes it to be honored by others. 

184. Morality in labor. — 4. Good morals, public and 
private, can not be left out of the conditions of good labor. 
A moral and upright community will always be an industrious 
one. The introduction of Christianity, with its moral teach- 
ings, among any barbarous people, has never failed to increase 
their industry and to improve their arts. Idleness and vice 
are almost always inseparable companions, while the self-con- 
trol required by good morals is near akin to that demanded 
by industry. The prudence and saving propensity of good 
morals lend fresh impulsion to labor ; but vice squanders both 
time and money. 

In a moral community, property is safer, and is held in 
higher esteem. The rewards of labor are thus both more se- 
cure and more valuable. The industry and wealth of New 
England have been proverbial in this country, and they were 
the logical results of the high moral ideas inculcated by the 
Pilgrims. Industry was held by them as one of the cardinal 
virtues; and idleness, instead of being a mark of gentihty, 
was considered next door to sin. From childhood up, the 
youth of New England were taught, and made to feel, that 
industry was the road to honor as well as to wealth. The 
maxims of FrankHn, in the almanacs of "Poor Richard," 



CONDITIONS FAVORING LABOR. 183 

were full of these sentiments of the value and respectability 
of labor. 

185. Fair reward a condition of fair work. — 5. The 

final condition of good labor — first in the order of time — is 
fair reward. The primary purpose of all work is to secure 
some gratification, in which we include the relief from fear or 
pain. This gratification constitutes its immediate motive, and 
by its nearness exerts a controlHng force. In the case of 
hired labor, the reward sought is the wages, or price for 
which the laborer delivers his labor. If these wages are too 
small, the labor will usually be lifeless and hesitating — watch- 
ing, not for the completion of work, but for the coming of 
night and rest. Necessity and competition may compel the 
laborer to sell his labor for a price which he believes is 
below its worth, and which will not secure for him his 
usual support; but the meagerness of his wages will cer- 
tainly affect his work, though his moral principles may urge 
him to fidelity to his task. The hope of future employment, 
at better wages, may, indeed, act like a present reward, 
and prevent the temporary low wages from affecting his labor- 
ing power. 

Adam Smith, who was one of the keenest observers in the 
economic field, said : ^ ' The liberal reward of labor, as it en- 
courages the propagation, so it increases the industry of the 
common people. The wages of labor are the encouragement 
of industry, which, like every other human quality, improves 
in proportion to the encouragement it receives. A plentiful 
subsistence increases the bodily strength of the laborer, and 
the comfortable hope of bettering his condition, and of ending 
his days, perhaps, in ease and plenty, animates him to exert 
that strength to the utmost. Where wages are high, accord- 
ingly, we shall always find the workmen more active, diligent, 
and expeditious, than where they are low; in England, for 
example, than Scotland; in the neighborhood of great towns, 
than in remote country places." 



1 84 POLITICAL ECONOMY. 

i86. Piece wages and time wages. — The stimulating 
power of piece-wages is greater than that of time-wages, simply 
because the laborer who works by the piece is in hopes of 
winning a larger wage; and because the connection between 
his work and its reward is closer. Smith objects to piece-wages 
on account of their too stimulating effect. He says that work- 
men, ' ' when they are liberally paid by the piece, are very apt 
to overwork themselves, and to ruin their health and constitu- 
tion in a few years." Engel, the German statistician, affirms 
that the introduction of piece-wages into lower Silesia increased 
the daily earnings of workmen by one third, one half, and even 
more. Roscher quotes Brassey as stating that the same work- 
men, engaged in grading and digging on a railroad, ' ' cost 
eighteen pence per yard when paid by the day, and seven 
pence when paid by the piece." The closer the connection 
between the labor and its reward, the more powerful the 
stimulus of that reward. 

On the other hand, the more distant and uncertain the 
wages, the less their eff'ect on the work done. Jules Simon, in 
his book on the work-women of France, states that employers 
sometimes adopted the plan of paying their workmen once a 
fortnight, as a means of breaking up the Sunday debauch; but 
it was found that the labor of the first week showed the effect 
of the delay. The laborer would not exert himself for the dis- 
tant wages; his energy awoke only at the last moment to 
recover the time lost. 

187. Self-employed labor. — But if wages by the piece 
are more stimulating than wages by the day, and still more 
than wages by the month, or the year, the enjoyment of the 
full product of his own labor is most stimulating of all to the 
laborer. Economists frequently quote, with approval of its 
truthfulness, the saying of Arthur Young : ' ' Give a man the se- 
cure possession of a bleak rock and he will turn it into a 
garden." The small farmers of France, whose little fields give 
such a patch-work look to the country, have, by the tireless 



CONDITIONS FAVORING LABOR. 185 

diligence of their self-employed labors, produced harvests which 
are astonishing to our American farmers. Many of our mer- 
chants and manufacturers, recognizing the influence of personal 
interest in the laborer, have tried the plan of giving to their 
employes, in addition to their set wages, a percentage of the 
profits of the year's business; and it is reported that they have 
found it to quicken sensibly the energy and effectiveness of the 
labors. 

188. Distribution of labor. — The distribution of laborers 
to the different employments has its economic side, as affecting 
the applications of labor; and its social side, as affecting the 
condition of the laborer in society. The number of laborers 
required in each employment is naturally limited by the demand 
for the goods or services of that employment. 

In very primitive, as also in old and crowded communities, 
little choice of labor is afforded. In the former, because the 
range of labor is narrow ; in the latter, because the employ- 
ments are all crowded. In both of these cases, the young are, 
to some extent, compelled to follow the trade of their fathers. 
But where the conditions of society and the intelligence of the 
individual permit a large freedom of choice, two classes of con- 
siderations chiefly determine the selection: i. The supposed 
advantages of the employment for gaining a livehhood and ac- 
cumulating wealth; 2. The social esteem in which the proposed 
employment is held, and the personal and social advantages 
secured to those who practice it. 

Under the first, the mercantile and manufacturing employ- 
ments, especially in our own land, would attract an undue pro- 
portion of labor, were it not that mercantile employments de- 
mand an accumulation of capital to begin with, and that the 
mechanical labors are supposed to require a long apprenticeship 
to fit one to follow them successfully. 

Next to the pay offered, the ease or hardship of the labor to 
be performed influences the choice. Employments imposing 
much and disagreeable drudgery are accepted only under 

p. E.— 16. 



1 86 POLITICAL ECONOMY. 

strong necessity, or under the temptation of large wages. 
Thus, common hard work falls to the lot of those who ordina- 
rily have too httle intelligence to do any thing else. Stone and 
brick masons are tempted to their trades by the larger wages 
they receive over those of the equally skillful but more pleas- 
antly employed carpenters. 

Among the personal and social considerations which deter- 
mine the choice of business, may be enumerated: i. The social 
esteem in which the work is held. This drives young Ameri- 
can women from domestic service and impels them into the 
school-rooms, as it also leads their brothers from the farms to 
the law offices, or the physician's post. 2. The prospect of 
future advancement. 3. The social companionship afforded 
either in the workshops and places of labor, or in the residence 
secured. 4. The personal pleasure and progress resulting from 
the occupation. The artist, the author, and sometimes those 
of the other professions find their motives of choice in these 
last considerations. 

It is evident that that employment will be best and most 
efficiently served which attracts to it the best and most intelli- 
gent and energetic laborers. But wages or profits will also be 
controlled by the competitions for the work to be done, or the 
business afforded, and hence favorite occupations, by the very 
crowds they attract, may become unremunerative and lose 
something of their popularity. 



CHAPTER XVII 



CAPITAL. 



i8g. General divisions. — In passing from labor to capi- 
tal, we enter another of the great battle-fields of Economic 
Science. Count Rossi called it one of the most thorny parts 
of Political Economy. What is capital? What does it do? 
What are its forms and functions? and, What are the laws of 
its increase and of its reward? These are questions which 
have engaged not only the attention of men of science, but 
also of those who seek industrial reforms or revolutions. 

Dismissing, as in the case of labor, all the social problems 
connected with capital, to their appropriate place in Social 
Economy, our present concern lies with its functions as one 
of the three great factors of work. These factors were shown 
to be natures gifts, labor, and capital. Two have been suffi- 
ciently explained; the third remains to be studied. 

The field is somewhat broad and complex; and the following 
chart of its territory will be useful to the reader and student : 



Nature and origin. 



Its forms. 



True or productive. 



- Possible or non-productive. 



Fixed and circulatin 



' Relations to labor. 



Material. r Grounds, etc. 

The plant A Buildings, etc. 

Supplies. I Machinery. 

Personal powers. 

Products. 

Money. 

Property. 
[ Credit, 
capital. 

Undivided in early times. 
Union in nature and function. 
Capital gives to labor time for its work. 
Capital gives to labor command over nature. 
Capital gives to labor immense productiveness. 
Relative growth of capital and labor. 
False antagonism. 

(187) 



1 88 POLITICAL ECONOMY. 

igo. True nature of capital. — Capital is wealth; but all 
wealth is not capital. This must be remembered, for a gate- 
way of error lies here. 

Taken as wealth, or goods, the origin of capital is the same 
as that of all other wealth. It is the preserved product of past 
labors. It does not seem necessary or useful to repeat the old 
stories, showing that the fisherman found that with a net he 
could catch more fish, and thus discovered capital, or learned 
its value. 

Taken as wealth, capital is also of the nature of all other 
wealth. Its values have the same elements, and it is subject to 
the same laws and fluctuations. It may be bought, sold, ex- 
changed, and consumed like all other goods. As property it is 
like all other property; and hence it is frequently confounded 
with property in general.* 

But capital, as capital, is not simply property or goods. 
Here lies the key to its secret, missed by so many econo- 
mists. 

To make its real nature, as capital, clear, let it be noticed 
that wealth has three distinct aspects under which men count it 
to possess value : 

I. Looking towards the consumer, it is valuable for the sat- 
isfactions it yields. He buys goods because they can gratify 
his desires. 



"^Whether all wealth, saved from immediate consumption, is capital, 
has long been one of the debated questions among economists. J. B. 
Say and MacCulloch held that all wealth, of whatever kind, is capital, 
and the " Dictionnaire de I'Economie Politique'* follows their opinion. 
On the other hand, Adam Smith, followed by Rossi, and in this 
country by Amasa Walker and Prof. Perry, counts as capital only 
those goods which are used in production. The debate concerns only 
the use of the word capital, for those who call all wealth capital 
divide capital into productive and non-productive, and in their de- 
scription of the former class virtually concede that it alone has the 
functions of true capital. 



CAPITAL. 189 

2. Looking towards the possessor of other wealth, it is 
valuable because of its purchasing power. He buys goods 
because he can exchange them for other goods which he may 
desire. 

3. Looking towards the laborer and his work, wealth is val- 
uable because of its productive aid and energy. He buys it 
because it will help him to increase largely his production. 

It is under this last aspect alone that wealth is capital. 
Capital is not wealth as wealth, but wealth as a producing 
agency. 

191. Origin of capitaL — Capital may be properly de- 
scribed as stored-up labor, or as stored-up force and skill. It 
enters into production under these forms. 

If labor be suspended upon any material before it reaches its 
proposed final form, as when trees are cut into logs, or logs are 
sawn into lumber, or hides are tanned into leather, these half- 
completed products have value as goods, but they require ad- 
ditional labor to bring them into the final forms of houses, or 
furniture, or boots and shoes, in which they can meet the 
wants of man. If the first labor is done by one workman, and 
the incomplete product be sold to a second, it evidently comes 
to the latter with the labor of the former stored up in it. This 
is the first form of capital. The second workman buys it be- 
cause of the work in it, and because it will save him the work 
of going to the woods for his materials. It is to him, prepared 
material. 

If in place of preparing materials the first laborer had made 
a tool or machine, it would have come to the second not only 
as stored-up labor, but also as stored-up force and skill. Its 
use is to give additional force and effectiveness to his own en- 
ergies, or to enable him to control and use the energies of 
nature. He might not be able to invent or construct the ma- 
chine for himself, and he buys the machine as including the 
aid of his predecessor's skill. The machine may be regarded 
as the second form of capital. 



190 POLITICAL ECONOMY. 

As the processes of production often occupy weeks or months 
before the finished product can be reached, it is evident that 
the laborer must have a supply of food and other necessaries 
of life laid up in store, or he must give a portion of his time to 
obtaining these. They are the means of renewing his used-up 
power of labor. If, now, the first laborer gives his toil to the 
production of these supplies, they will be bought by the second 
not only as stored-up labor, but as stored-up personal energy 
which they nourish and preserve. This is the third form of 
capital. 

Now suppose that our first workman has spent his time and 
energies in learning certain branches of knowledge, or in ac- 
quiring some special form of skill which the second workman 
needs to complete his product, the latter will buy_ the services 
of the first and put them also into his work, as he has already 
put in his own personal powers. This fourth form of capital is 
not usually called capital, but labor. It is labor to him who 
sells it, and the price he receives is wages; but to the pur- 
chaser it is one of the investments he makes in his products. 
It is not stored-up labor or skill, in the same sense that the 
other forms of capital are ; but it is, in fact, the stored-up labor 
which was used in acquiring the power or intelligence now 
offered. The wages paid are always considered capital, and it 
is of little consequence whether we consider the value pur- 
chased as labor or as capital. It is labor to him who does it, 
and capital to him who buys it. Adam Smith enumerates ' ' ac- 
quired and useful talents" as capital. He says "the perfected 
skill of a laborer may be considered as a machine or instrument 
which abridges labor and returns with profit the expense which 
it cost." 

192. Two chief classes of capital. — We have affirmed 
that capital is wealth, but that all wealth is not capital. This 
is strictly true; but as all wealth may be turned into capital, or 
at least exchanged for capital, men usually count all their pos- 
sessions as so much possible capital. This may be allowed if 



CAPITAL. 191 

care be taken not to lose sight of the real nature of capital. 
We shall then have two forms of capital : 

1. True or active capital. 

2. Possible or reserved capital. 

Either form may pass into the other, since the chief differ- 
ence between them is in the uses for which they are employed. 
An exception must, however, be made in the case of those 
forms of property which can not be used in production, in one 
of the four methods described. 

Money, the form in which capital is usually borrowed, and in 
which it is estimated or counted, is not, properly, capital at all, 
except in the business of exchange, in which it is an almost in- 
dispensable instrument. And, as some exchanges are essential 
in the management of all business, money may be regarded as 
a sort of universal capital. In actual production, money is 
neither materials, machinery, suppHes, nor labor; though, from 
its universal exchangeability, it is easily transformed into any 
one of these. It is the most convenient form of reserved 
capital, because it can at once, and in either small or large 
quantities, be exchanged for true capital. 

The finished products, not yet sold, belong properly to pos- 
sible, and not to active, capital. They are not wealth to be 
used longer in production by. their producer, but, like any 
other property owned by him, may, at his will, be exchanged 
for materials or for some other form of true capital. 

193. Credit. — There is an agency which, though not prop- 
erty, performs some of the functions of property, and enters 
largely into production, as it does into all the forms of busi- 
ness. This agency is credit. By means of this, men who are 
without wealth of any kind, buy materials, employ labor, 
purchase machinery, and produce goods. 

Credit is the power to borrow other people's property. It is 
the confidence which one's character and circumstances inspire 
in other men, and which induces them to entrust the credited 
party with their goods or money, on his promise to repay the 



192 POLITICAL ECONOMY. 

same, in a stipulated time, either with or without interest or 
compensation for use. It is a purchase with the payment 
deferred. The borrower is said to "obtain credit," or to be 
trusted. The lender is said to "give credit." The promise to 
pay is usually written, and this written promise is called a 
promissory note. 

.. Sometimes the real party trusted is not the one receiving the 
goods; but some one else, who promises to insure the payment, 
and who also signs the note as endorser, or backer. In other 
cases, the trust is not a personal one ; but the goods or money 
are delivered, on the pledge of some property as security for 
the payment of the debt when due. But, whatever be the 
motive of the trust, or the security given to the lender, the 
party receiving the goods or money is said to have obtained 
credit. 

Credit fills, necessarily, an immense space in the world of 
business. The laborer gives credit to his employer, at least 
till pay day comes. Goods are bought and sold on credit; 
materials are furnished, work is performed, great industrial 
enterprises are undertaken, and immense transfers of wealth are 
made daily, on credit — that is, on a promise of future payment, 
secured by the good faith of the party promising, or by other 
securities. Every debt that is owed implies a credit given to 
the debtor. All debts are also credits. All notes, drafts, 
bills of exchange — all bank-notes and greenbacks — all bonds 
and mortgages, all securities of governments or corporations, 
imply so many credits. 

Credit is not wealth in itself. It does not count in the 
world's resources in the census of actual values; but it has the 
power to command the use of wealth, and therefore may be 
counted as a sort of reserved capital. Materials and labor 
bought on credit serve the same purpose as those bought for 
money. 

The questions concerning the credit system and its advan- 
tages or dangers do not belong here. 



CAPITAL. 193 

194. Variations in forms of employed capital. — The 

four forms of true capital, already described, do not enter 
equally into all branches of business. They are largely varied 
both in character and in relative amounts. The case already 
supposed is that of simple manufacture; but it is evident that 
in manufactures the amount and cost of materials used, as well 
as of machinery, supplies, and personal effort will largely vary. 

Materials must be understood to include not only the mate- 
rials, either raw or partly prepared, out of which goods are to 
be constructed, but also all auxiliary substances, such as lubri- 
cating oils, acids, mordants, and other matters consumed in 
the processes of production, though not remaining in the prod- 
ucts. The finished product of one industry is often the mate- 
rial of another, as in the case of the lumber and leather. Ab- 
solutely crude or raw materials, as found in nature, can not be 
counted as capital They are gifts of nature and have no 
value till appropriated by man. The fish in the sea and the 
fur-bearing animals in the forests, are not the capital of the 
fishermen and trappers who take them, though they are the 
materials to which their labor is applied. 

Machinery is to be understood as including all that is called 
*'the plant." It embraces the buildings and structures of all 
kinds used in or for the business, with the grounds on which 
they stand, and all yards and inclosures, private roads, ways, 
and canals. It includes also all tools, machinery, implements, 
and vehicles employed about the work, and all rights, fran- 
chises, or permits necessary to the use of any machinery. 

Supplies include all necessaries of life, for the manager or 
proprietor, and all employes. They must also embrace the 
support of the famifies, as the workman must provide for his 
wife and children. Food, housing, clothing, and the comforts 
common to the station of each person are to be counted in. 
These are usually reckoned as parts of the absolute wages,, 
whether provided by the employer or purchased by the work- 
man. 

P. E.— 17. 



194 POLITICAL ECONOMY. 

The relative amounts of these different forms of capital differ 
with the different departments of industry. In agriculture, the 
raw materials consist chiefly of the seed and fertilizers. The 
land itself is to be counted as a machine. The farmer's plant 
includes his farm, teams, tools, barns and other buildings, 
fences, and vehicles. Cows and sheep, kept for their prod- 
ucts, belong to the machinery; animals bought or raised for 
fattening may be properly counted as materials. The suppHes 
are the food provided for men and working or productive ani- 
mals, with all necessaries for both. 

In the mercantile industries, the goods bought and sold 
must be regarded as materials, which it is the merchant's 
business to collect from the several producers, and to store 
and distribute to his customers. Most of his active capital 
must, evidently, be in this form, while in agriculture the 
material used is comparatively small in amount. The mer- 
chant's plant is chiefly his store-house and its fittings, unless 
he is also an importer of goods, when his ships and other 
vehicles of transportation are to be reckoned as a part of his 
machinery. 

195. Other classifications of capital. — Other classifica- 
tions of capital have been employed by many economists, two 
of which it is just to mention. The first divides all capital 
into productive, or ''capital in use," as some choose to call 
it, and non-productive. Productive capital agrees nearly with 
what we have named true or active capital. Non-productive 
is simply goods not employed in production, but devoted to 
consumption. The distinction is not well taken, since all 
wealth, unless hoarded, is in process of consumption, — that 
which is employed in production, as well as that which is be- 
ing used to satisfy wants. The cotton-mill is consuming its 
machinery, as much as its fabrics are being consumed by 
those using them. Nor is the latter consumption unproduc- 
tive, since those fabrics may be a part of the necessary sup- 
plies of its own operatives, or of those of other manufactories. 



CAPITAL. 195 

The second division is into fixed and circulating capital. 
By fixed capital is meant, as ordinarily defined, products 
which have reached their final form, and are not to undergo 
any other changes except in their consumption. Amasa Walker 
("Science of Wealth") limits fixed capital to ''property em- 
ployed in production, which, from its nature, can not be ad- 
vantageously changed to any other use than that for which it 
was originally designed." He, however, includes money in 
circulating capital, though it is evident that it can not be ap- 
plied to any other use than that of money, except by destroy- 
ing its character as money, and reducing it to bullion. Dr. 
Roscher says: ''Fixed capital may be used many times in 
production by its owner; circulating capital only once." He 
classes a farmer's beasts of burthen as fixed capital, and his 
cattle intended for slaughter as circulating capital. It is ob- 
vious that the distinction between the two kinds is too vague 
and indeterminate to be of much use. All wealth which is in 
use in any way, whether as materials, as machinery, as sup- 
plies, or in ordinary use to satisfy human wants, is undergoing 
changes more or less rapidly, and, in most cases, disappears 
in one form to reappear in another, either in a new form of 
the same substance, or in a new value created by the use 
of the old. Bread is consumed at once, but a house may 
wear for a century. Both yield pleasure, and both nourish 
bodily strength and health as their proper and valuable result. 

A farmer's oxen are slowly consumed in dragging the plow, 
while his fat cattle are killed and consumed in a few days, 
as meat upon the table, and both consumptions may be pro- 
ductive. The former produces grain which furnishes bread 
and seed for the next year; while the latter serves as food 
for this. It can not even be said that wealth tends constantly 
toward more fixed and permanent forms. With the increase 
of wealth the more permanent forms will increase in amount, 
but not more than the goods of immediate use and consumption. 

Permanency belongs to no form of value. All values begin 



196 POLITICAL ECONOMY. 

to decay and disappear from the moment they reach their 
full ripeness and completion. There is, it is true, in some 
articles, a value in their antiquity, but in these the value may 
be said to be still ripening. But objects valued for the use 
that is in them, and not for associations which they represent, 
change with years if not with use, and so their values gradu- 
ally decay or are consumed. As J. S. Mill says, wealth is 
perpetuated like population — by constant reproduction. The 
majority of the wealth of any country is said to be the prod- 
uct of the year. The accumulated wealth of the United States 
probably does not, in any case, exceed five times the annual 
production. 



CHAPTER XVIII. 

RELATIONS OF CAPITAL AND LABOR. 

196. Economic relations. — Capital has been seen in its 
origin, nature, and kinds. We advance, now, to see it stand- 
ing beside labor, in mighty companionship, — the twin giants 
of modern arts and civilization. 

The relations which bind these powerful agencies of indus- 
try together, in mutual helpfulness, have incidentally appeared 
along the track of the discussion, but their importance, if not 
their difficulty, demand for these relations a fuller exposition. 
But we must still, for a time, cleave to the purely economic 
side of the subject. It is the relations of capital and labor, 
not those of the capitalist and laborer, which are here in 
sight. The man behind the capital and the man behind the 
labor must finally be seen; but in this chapter both capital 
and labor may be regarded as belonging to one and the same 
man. The separation in ownership imports much in social 
science, but is unimportant in pure economics. 

In the early stages of society and of the arts, capital is 
scarcely thought of separately from labor. The savage does 
not think of his bow and arrow, or of his knife and hatchet, 
as capital, nor calculate their share in the work of the hunt ; 
but he knows full well their convenience, and will not will- 
ingly start on the chase without them. He does not count his 
hut as a producing agent, nor consider his store of corn and 
venison, dried for winter use, as giving him any larger power 

as a producer. He avails himself, indeed, of all these, but it 

(197) 



198 POLITICAL ECONOMY. 

is as he uses his hands or feet, without a thought of their 
separate force or vahie. A long distance must have been trav- 
eled over the roadways of human progress before labor and 
capital began to be seen as separate economic agents; but 
their relations existed from the outset, and were the same 
in form and force that they are to-day. 

197. Union of labor and capital necessary. — The first 
and simplest relation between capital and labor is that of their 
necessary union — their almost unity. Capital is simply the 
product of labor; but a product, as we have seen, in which 
labor has stored itself to unite with new labor. The idea 
which the first laborer sought to realize passed into the material 
product, as far as completed; and now it lies partly accom- 
plished and visible in the work done, and partly an unrealized 
conception in the mind of labor. Thus, capital is the incom- 
plete thought of labor; it is unfinished work. The felled oak 
is the initial idea of the finished ship. 

To discard capital, labor must disjoin itself from all its 
products, and perpetually begin anew. Its half-finished work 
of yesterday must be thrown away, since, in the strictest 
sense, that, too, is capital to-day. The food it has stored, 
the tools it has prepared, and the material it has gathered 
must be abandoned, if it will not unite its efforts with capital, 
for these are the very forms that capital chiefly takes to help 
labor. The laborer who would be rid of capital and its helps, 
must disarm himself of his tools, disrobe himself of his cloth- 
ing, turn himself into the street for his dwelling, and abandon 
all provisions he has made for his sustenance in labor; nay, 
he must fling aside his products as fast as they are sufiflciently 
advanced to be valuable, for the very matter he works on 
turns to capital under his strokes. Even the man himself is, 
as a laborer, the stored-up toil of years of costly nurture. 

But the union of capital and labor is something more than 
that of cause and effect — of producer and products. The 
forms into which these products are purposely wrought have 



RELATIONS OF CAPITAL AND LABOR. 199 

their utility — their fitness for some use or service — and by 
virtue of this utiHty, they give to labor their powerful coop- 
eration and aid. They unite with the workman as a fellow- 
worker. They add to the force of his blows, to the push of 
his strength, to the plastic skill of his fingers. With his ham- 
mers, as "artificial fists," he drives the spikes, and pounds 
the rocks to pieces. With his edge tools, which one might 
call artificial teeth, he cuts down the forest trees, and hews 
and smooths the timber to his wants. 

Every-where the two stand and work together in a mutual 
dependence — a union as necessary as it is fruitful. Capital 
without labor can produce nothing. Labor without capital 
can scarcely sustain life. Apart, labor is helpless, and capital 
is useless as capital; together, they are almost omnipotent. 
They people the wilderness with populous cities, and turn the 
sea into dry land. They have filled the world with beauty 
and plenty, and have lifted humanity from the nakedness 
and brutahty of barbarism to the refinements and power of 
civilization. 

ig8. Capital gives to labor time. — The second impor- 
tant service of capital to labor is the gift of time for its work. 
The labor of the savage, or of the man unaided by capital, 
must be given to the satisfaction of immediate wants. He 
must work in order that he may eat and live, and he must 
work chiefly, if not wholly, at the food-getting and life-sustain- 
ing employments. His game must be caught, or his wild 
fruits gathered, to-day, for he has nothing to eat; and his hut 
or wigwam must be built at once, for he has no other shelter 
for his sleep. But the laborer who has capital to sustain him, 
may lay out the work of years before him : and may engage 
himself in great undertakings which a century will not see 
finished. Capital is stored-up food and sustenance. 

In modern industry, long periods of time and stretches of 
space often intervene between the raw material as it lies in 
nature, and the finished product as it appears in market. In 



200 POLITICAL ECONOMY. 

the gigantic cotton manufacture, the labor begins with the 
preparation of the soil and the planting of the seed in India 
or Carolina. Months, and even years, may pass before the 
harvested fibers, crossing the ocean to Old or New England, 
reappear, from the looms and the calico printing-works, as 
finished cloth, and get their price from the consumers. And 
all this time, an army of laborers, including planters, pickers, 
ginners, packers, carders, spinners, weavers, and printers, and 
of adjutant laborers, as ship-builders, sailors, machinists, and 
others, are employed and sustained to help on the work. It 
is capital that stands behind them all this time, sustaining the 
laborers of all sorts, and enabling them to go on fearlessly 
with their labor. 

Men project railroads across the continents, and telegraphs 
through the oceans, which must cost milHons of treasure and 
years of time, trusting to the power of capital to sustain them 
and their armies of labor till their work is done, and till the 
receipts from loaded trains and from the myriads of messages 
shall pay them for the toil. Labor, working alone and un- 
supported, has the hour for its own; united with capital, it is 
the master of the years — of the centuries, if necessary, to its 
tasks. Some of the cathedrals were six centuries in building. 

199. Capital gives power over nature. — Capital in- 
creases immensely the productiveness of labor. This fact has 
constantly reappeared in our discussions. Its secret remains 
to be told. Capital lends to labor power over nature! The 
solitary and unaided worker fights nature. Its rugged mate- 
rials and unsubdued forces resist him at every step. Nature's 
gifts are, indeed, free, but he must come and fetch them, 
if he can find them. Capital means mastery over nature. 
Alone, man searches for nature's fruits where she produces 
them, in the wilds. With capital he compels her to grow 
them in larger profusion and in richer forms, by his door- 
way. Alone, he hunts his meat in its native haunts; with 
capital, his yards and fields are filled with the fattened pork, 



RELATIONS OF CAPITAL AND LABOR. 20I 

the tender mutton, and the nourishing beef. With the aid of 
capital, he sets nature at work, and waits in ease till it has 
done its work and ripened its products. 

200, Capital commands nature's forces. — Capital 
means, also, the command of nature's forces. Unaided, the 
laborer Hfts his burthens against gravity; with the lever, or 
the wheel and axle, the simplest forms of capital, he makes 
his own gravity lift the heavy log and raise it to its place 
upon his hut. Further on, the gravity of the ponderous loco- 
motive, cleaving to the track, carries his loads, a myriad 
times heaver and a hundred times swifter, than he could have 
borne them. Time, space, gravity, cohesion, fire, floods, 
and the finest chemic forces of nature, all wear the harness 
that capital puts upon them, and work under the hand of 
labor. At the Centennial Exposition, General Grant, in the 
presence of the representatives of the world, assembled in 
Judges' Hall, touched an electric button, and instantly, in the 
distant Machinery Hall, the ponderous arms of the great Cor- 
liss engine began to move, and in all directions, throughout 
the giant building, thousands of machines began their work. 
It was a fit type of labor and capital. General Grant stood 
there, the representative of labor ; the myriad machinery was 
capital, holding in leash the harnessed forces of nature. The 
mere touch of labor set them all at work. 

But capital is more still; it is human skill taught to fingers 
of steel and arms of iron. In touching the electric button. 
General Grant set at work the skill of ten thousand invent- 
ors incarnated in that wilderness of machinery. The girl who 
stands before the cotton-spinning machinery, wields the skill 
of Arkwright and the hundreds who have added their work 
to his. 

The enormous productiveness of modern industry, already 
described in another chapter, ceases to be wonderful when 
the nature of the aid that capital gives to labor is fully un- 
derstood. This productiveness already so far exceeds the cur- 



202 POLITICAL ECONOMY. 

rent demand that large masses of machinery He idle for 
months out of every year. Could the ^'.'. insatiable Tiiarket" be 
found which would absorb, at fair prices, all the goods that 
labor and capital can produce, they would double their pro- 
ductiveness almost in a single year. 

20I. Relative increase. — The relative growth of capital 
and labor is one of the questions which economic science is 
called upon to answer. 

It is obvious that capital may easily be increased to any 
desired extent. Human labor can multiply only with the mul- 
tiplication of population. It is true that the actual laboring 
force never equals the entire labor power of the population, 
and the active capital never equals the entire wealth. Much 
of both labor power and of possible capital always lies idle. 
Neither capital nor labor come into service till the demand 
for them promises a reward equal to their value at the time 
of the service. They both work for wages, though the wages 
of capital are usually called interest. 

The demand for both labor and capital depends upon the 
demand for goods; but, subordinate to this, capital creates a 
demand for labor, and labor a demand for capital. Capital, 
seeking employment, demands labor; and labor, wishing to 
employ itself, demands capital. Reference is made here to 
true capital, not to the money or other property which the 
owner may wish to loan or invest in other ways, though it is 
evident that the interest on money loaned must also be finally 
paid by the products which come from its uniting somewhere 
with labor. 

All increase of wealth is not increase of capital. When 
wealth is multiplied rapidly, much of it goes into the erection 
of costly houses, and into expensive equipage or other forms 
of luxurious consumption. But, in general, capital increases 
with wealth, for (i) most holders of wealth desire to make 
it productive, and are ready, therefore, to employ it as active 
capital; and (2) the prevalence of wealth increases the con- 



RELATIONS OF CAPITAL AND LABOR. 



203 



sumption of goods, and so calls into action both more capital 
and more labor. '^'-• 

202. Interest falls as wages rise. — History proves that 
capital increases faster than labor, at least in modern times. 
This might be proved by showing, from statistics, that wealth 
has increased faster than population;* but it will be better 
shown by the fact that the interest on capital has steadily 
declined, while the wages of labor have steadily risen. Fifty 
years ago, throughout the Eastern States, the common wages 
of servant girls was from fifty to seventy-five cents a week, 
and those of common laborers, fifty cents a day, or ten dol- 
lars a month; to-day the same persons would be paid, re- 
spectively, three dollars a week and from one to one and a 
half dollars a day, or twenty-five dollars a month. During 
the same time, the interest on common loans has fallen from 
seven per cent to five per cent on the average. In England, 



^'According to the computations of Gen. F. A. Walker, Superin- 
tendent of the Census, the population and aggregate wealth of this 
country, in 1850, i860, and 1870, was as follows: 



DATE. 


POPULATION. 


AGGREGATE WEALTH. 


WEALTH PER CAPITA. 


1850 
i860 
1870 


23,191,876 
31,443,321 
38,558,371 


$ 7,135,780,218 
16,159,616,068! 
30,068,518,507 


$307.68 
513-89 
779.81 



Gen. Walker thinks the increase was something less than here 
shown, the error being due to errors in census and to inflations of 
prices in 1870. But with all deductions the increase was still much 
larger than the increase of population. 

David A. Wells estimated the aggregate wealth of the United States, 
in i860, at $14,183,000,000, and its increase, the following nine years, 
at $9,217,000,000. 

The aggregate, for 1880, has been estimated at $38,000,000,000. 

\ Including slaves, valued at $3,000,000,000. 



204 POLITICAL ECONOMY. 

between 1660 and 1685, it was complained that the mechanics 
demanded one shiUing a day for their labor, though they 
often accepted less. In 1830, the wages of the English car- 
penter was five shillings and six pence per day. The legal 
rate of interest, which had been, in the time of Henry VIII., 
ten per cent, and in the reign of James I. eight per cent, 
was, in 1660, six per cent; and it fell, the next century, to 
five per cent. The common rate in England, to-day, is from 
three to four per cent. This increase of the price of labor 
and cheapening of capital prove, as by a double argument, 
that capital grows faster than the laboring power of the world. 
But the full breadth of the proof is not seen without taking 
into account that capital plays constantly a relatively larger 
part, and labor constantly a smaller part, in the world's work. 
Machinery, which is one of the forms of capital, has replaced 
a large part of the hand laborers of former times, thus increas- 
ing the demand for capital and diminishing relatively the de- 
mand for labor ; and yet the aggregate increase of capital has 
grown so far beyond the increasing aggregate demand, that 
its price steadily falls, while the aggregate demand for labor 
has so steadily outgrown the supply that work has multiplied 
and wages increased even faster than the interest on capital 
has fallen. 

H. C. Carey has interpreted this increase of wages and 
diminution of interest as an increase of the value and power 
of men over the power and value of capital. He says 
("Principles of Social Science"): ''With the growth of wealth 
and numbers, the power of combination increases, with great 
increase in the productiveness of labor, and in the power of 
accumulation, — every step in that direction being attended by 
decline in the power of the already existing capital to com- 
mand the services of the laborer, and by increase of power on 
the part of the latter to command the aid of capital. . . 
The laborer's proportion of the increased product tends thus 
steadily to increase, while that of the capitalist tends as regu- 



RELATIONS OF CAPITAL AND LABOR. 205 

larly to decline." This aspect of the fact is doubtless also 
true as a result, the larger demand for labor over the demand 
for capital giving the laborer power over capital. Mr. Carey 
also brings out the fact that, notwithstanding the diminished 
rate of interest, the capitalist gets a larger return than before. 
He states that in France, in the period from 1700 to 1840, 
the average wages of agricultural labor quadrupled. At the 
first date, the proportion of products allotted the laborer was 
thirty-five per cent; at the latter date, it was sixty per cent; 
the land-owner retaining, in the first case, sixty-five per cent, 
and in the latter, forty per cent. But so great has been the 
increase of product, that the smaller proportion of the latter 
date gave to the capitalists 2,000,000,000 francs in place of 
850,000,000 francs, which they received at the earlier one. 

203. No antagonism of capital and labor. — It seems 
almost unnecessary, after the facts already stated, to afiirm 
that there is no antagonism between labor and capital, — that 
their true relation is one of mutual dependence and helpful 
cooperation. But this antagonism is so frequently implied or 
paraded in popular speech, that it seems wise and needful to 
notice the question here, if for no other reason, yet to send 
it where it properly belongs — to the chapter on Distribution 
of Wealth and to Social Economy. 

It has already been shown that capital without labor can 
earn nothing (the interest on money loaned being in the last 
analysis paid out of production), and that labor without capi- 
tal — that is, without its tools, materials, and supplies — can 
scarcely win its daily food. A quarrel between labor and capi- 
tal would be a quarrel between the worker and his tools— be- 
tween raw materials and the hand that proposed to shape them 
into things of beauty and utility. 

The antagonism, if one exists, must be between the laborer 
and the capitalist, as men ; and it comes about from some dis- 
agreement as to the share which each shall have of the prod- 
ucts of their united work and wealth. It is, therefore, a ques- 



206 POLITICAL ECONOMY. 

tion of the distribution of values. But, as it also involves 
questions of the rights and well-being of both capitaHsts and 
laborers, it belongs also to Social Economy. 

204. The great forms of work.— Groups of indus- 
try. — The field of work must now be viewed under another 
aspect. Our survey has thus far taken in its great factors, — 
nature's gifts, labor, and capital, under their general laws and 
relations; but, under a closer view, the innumerable industries 
will be seen to group themselves into a few great classes, each 
having its own special field and its own distinctive forms of 
materials, labor, and capital. 

In our first broad glance at the field of work. Chapter X, we 
saw before us man confronting the world of matter and force, 
and our inquiry showed that his power over nature was limited 
to three great classes of changes which he might effect: i. 
Changes in substances; 2. Changes in forms; and, 3. Changes 
in place. These three furnish the ground and occasion for the 
chief subdivision of human industries. 

The changes of substance are effected by nature's vital and 
chemic molecular forces, and may be counted, therefore, as in- 
cluding all nature's immediate products, animal, vegetable, and 
mineral. Man, in these, does but watch and serve natural 
processes, and collect for himself their products. 

The changes in forms are such as man imposes upon crude 
matter, shaping the raw and commonly worthless materials into 
forms designed by his own thoughts. These products are pre- 
eminently products of mechanic art. The changes in place are 
the transportation of goods and materials from their places of 
production to those of final use or consumption. They involve, 
as their necessary adjunct, the exchanges of goods. 

The general features of these groups of changes have already 
been given with sufficient fullness in Chapter X. We now re- 
call them to study their economic conditions; and, for the 
convenience of the reader and student, we show them first in 
outline. 



RELATIONS OF CAPITAL AND LABOR. 



207 





Changes ■ 


•{ 


Natural 




in sub- 


products. 


Pi 


stance. - 






















Changes ■ 


r 


Mechan- 


in 




ical 


CD 


forms. -' 


I 


products. 


^ 








P^ 








£ 


Changes ■ 


f 


Exchange 




in 


M 


of 




place. 


I 


products. 



Vital. 



Chemic. 



f Foods — Animal, vegetable. ) » . , 

1 ,^ . , . . , 11 r Agriculture. 

<• Materials — Animal, vegetable. ) 

f Ores, rocks, coal, salt, etc. — Mining 

and metallurgic arts. 

Products, drugs, etc. — Chemic manu- 

[ factures. 

Building arts — Architecture, carpentering, etc. 

Cloth-making arts. 

Tool-making — Machines, implements, vehicles. 

Engineering arts. 

Decorative arts. 

f Between owners simply— Trade— Mercantile art. 

I ^ , , ^ f Foreign. 

Between owners and places — Commerce i .^ 

•- Domestic, 

[ Changes in place — Transportation. y/ 



-The limits of this volume forbid more than a brief discussion 
of one 'or two of these. 



CHAPTER XIX. 

AGRICULTURAL OR RURAL ECONOMY. 

/ 

205. Synoptical view. — Agriculture, the widest employ- 
ment of mankind, has marked features which give it a distinct 
as well as a prominent place in economic science. As our dis- 
cussion of it must be limited to a single chapter, in place of 
the volume which it properly demands, it will help us to pre- 
sent it first in outline, as follows : 



Division; 

or 

classes. 



Soil cul 
ture. 



Animal 
husbandry. 



Nature and importance of agricultural industry. 

r Common— Field crops, grasses, cereals, roots, etc. 
Plantation — cotton, sugar, tobacco, coffee, etc. 
Horticulture — market gardening, etc. 
Forestry and fruit culture. 

Stock breeding and feeding — horses, cattle, etc. 
Sheep husbandry — wool growing. 
Dairy farming and manufactures. 
Fish culture, poultry, bee-keeping, etc. 
Silk worm management. 
Mixed husbandry. 

{I. The wants it supplies — its markets. 
2. Character of its products. 
3. Its materials and forces. 
4. Its enormous extent. 
r Nature's gifts — land, atmospheric forces. 
Labor — human, animal — cost and economy of. 

(Land and its improvements. 
Animals — working and feeding. 
Machinery and working capital. 

1. Waste of land. 

2. Waste of animal forces. 

3. Want and waste of capital. \ 

4. Waste by poor and insufficient stock. 

5. Too restricted cultures. 



Factors... 



Some mistakes of Ameri- 
can rural economy 



(208) 



AGRICULTURAL OR RURAL ECONOMY. 209 

206. Nature of the agricultural industry. — Of all the 

industries, agriculture stands nearest nature. It is indissolubly 
bound to the soil. In the beginning, it was merely the 
gatherer of nature's gifts of fruits, vegetables, and animals; 
and even now, in its highest development yet reached, it 
simply follows and serves nature. Its whole art lies in the 
right use of the energies which are found in the sunshine and 
soil, and in the living organisms of plants and animals. To 
conserve, direct, utilize, and collect these energies is the whole 
problem of practical and productive agriculture. 

As the great food-producing industry, agriculture stands also 
nearest the life of mankind. Thus, nearest nature and nearest 
man, it unites the two in a vital and economic connection — 
man mastering nature; nature serving man. 

Out of the soil, agriculture raises the vegetables which, feed- 
ing on mineral matter, transmute it into organic substance. 
With this it feeds its animals, and thus transforms its coarser 
vegetables into the more highly organized and nutritious animal 
matter. On these two, vegetables and animals, it feeds man. 
Thus it stands as the helpful watcher over that divinely organ- 
ized process by which the dust of the earth is continually trans- 
formed into living men. 

Then again, it serves the divine will, and breathes perpetu- 
ally, into the re-created man, the breath of life. Its vegetable 
organisms receive and store up energy from the solar heat 
which causes their growth. Animals take and transmute this 
energy into intenser forms; and man, feeding upon both, bor- 
rows from both the life-feeding forces which keep him "a living 
soul." 

But agriculture pauses not with its gifts of food and vital 
force; it helps to house and dress the bodies which it nourishes 
and re-invigorates. In the fibers of such plants as the cotton, 
the flax, the hemp, and the manilla, in the skins, hair, wool, 
and furs of its animals, and in the cocoons of the silk worms, it 
produces the materials for our clothing; and out of its forests 

p. E.— 18. 



2IO POLITICAL ECONOMY. 

comes the wood for our houses and their furniture. Nor does 
its field of usefulness end here. From its forests and fields, 
and from its animal tribes, come innumerable and indispen- 
sable materials for a hundred arts — the means of our luxury and 
the substance of our wealth. 

Thus, standing by the great mute laboratories of nature, in 
which the life forces are working the mysterious changes of 
matter; watching and guiding these forces to richer and finer 
products, agriculture holds an economic position unrivaled in 
its power and importance among the employments of mankind. 

207. The two grand divisions of agriculture.— In the 
two great classes of its products — animal and vegetable — is 
found the basis of the main subdivision of agriculture, — plant 
and animal husbandry, or soil culture and zootechny. Both 
employ the soil; but one seeks vegetable, and the other, 
animal products. 

The first account of human industry which comes down to 
us from remote antiquity, shows these two grand divisions of 
agriculture as already existing. Cain, the first born, was "a 
tiller of the ground," and his brother, Abel, was "a keeper of 
sheep." Adam and Eve were simply fruit-growers, gathering 
the products of the trees they found planted, though the divine 
voice had already given them both flesh and fruits as their 
natural food, and thus predicted the forms their labors must 
take. 

Among semi-civilized peoples, the rearing and care of animals 
is the favorite form of husbandry. Abraham and his descend- 
ants, until their removal to Egypt, were chiefly herdsmen ; and 
the nomadic tribes of Asia were, for ages, supported chiefly by 
the herds of cattle, horses, and camels, which they drove from 
place to place to find pasturage. They often possessed large 
amounts of wealth of this sort, but their exchanges were few, 
and their arts were simple and unproductive. When they 
sought permanent settlement, they were driven to a cultivation 
of the soil to secure supplies of food for themselves and their 



AGRICULTURAL OR RURAL ECONOMY. 211 

animals. Civilization depends permanently upon the power of 
the soil to yield support to the great social aggregations it 
requires. 

208. Mixed husbandry. — The highest condition of agri- 
culture has been found to require the union of both of its 
forms, or mixed husbandry, as it is called. Soil culture can 
not wholly supplant the use of animals, nor flourish without 
their aid. The fertility of the soil is not inexhaustible, and the 
litter from the pens and stables of the domestic animals has 
been found, in most cases and places, the best and cheapest 
means of restoring the wasted fertility. Nor can agriculture, in 
one kind, supply the food required by mankind. 

The two cultures are complementary to each other. A large 
part of the products of the soil, and those most easily and 
abundantly produced, can be utilized only by the aid of cattle 
or other domestic animals. The cereals, fruits, nuts, and a 
few succulent plants and roots can be made to serve immedi- 
ately as food for man; but the large and luxuriant family of 
grasses, the stalks and straw of maize and the grains, much of 
the foliage of the herbaceous plants, and the coarser root crops 
can avail for human food only after they have been transformed 
into the flesh of animals. The refuse is thrown back into the 
ground, and fits it for fresh production. Thus, in the very 
constitution of nature, the union of the two great classes of 
agriculture lies decreed as by a fiat of deity. 

209. Classes of soil-culture. — The chief classes of soil- 
culturing agriculture are: (i) the common field farming, too 
well known to need description; (2) Plantation farming, in 
which large tracts of ground are devoted to some one crop, 
on which the planter relies for his profits, and to which he 
devotes his capital and labor chiefly, if not wholly; as in the 
great cotton and sugar plantations of the Southern States, the 
tea .plantations of China and Assam, and the coffee fields of 
Java, Arabia, and Brazil; (3) horticulture, including the mi- 
nute and intensive cultivation of the market gardens; and (4) 



212 POLITICAL ECONOMY. 

the forest growing, and tree culture of the fruit-raisers. To 
these may be added many forms of special cultures^ as of me- 
dicinal plants and others used in the arts. Each of these has 
its peculiar economic conditions, which must be mastered by 
successful managers, but would too much enlarge our field of 
discussion. 

It is to the wide field of common agriculture, the great in- 
dustry which feeds and clothes us, that our discussion must 
be chiefly confined. 

2IO. Economic peculiarities. — The wants met. — The 
chief economic peculiarities of common agriculture are: i. The 
character of the wants which it meets and satisfies; 2. The 
nature of its products; 3. The materials and forces which it 
employs; 4. The extent of its operations. 

The wants met by agriculture are the great vital needs of 
mankind. These wants are imperative, incessant, and enor- 
mous in amount, and they, therefore, afford the broadest and 
surest basis of values presented to any industry. Without 
food, life itself must end; and the demand for food is renewed 
every day of life. No changes of fashion, and no conditions 
of adversity can intermit or greatly alter this demand. The 
market for foods can never cease. 

These wants are common to the whole race, and to every 
individual member of it, from the beggar to the richest mon- 
arch. Hence, the articles produced must be not only large in 
amount, but also, in a large part at least, they must be low 
in cost and price. To make them high priced would be to 
sentence half the race to starvation. It was the rise in the 
price of food which at last sent France into revolution. That 
long agony and outpour of blood broke forth with the march 
of the starving women of Paris upon the national assembly at 
Versailles, uttering the one terrible cry of "bread." Food 
may, in great emergencies, for a short time command high 
prices, but in the long run it must be cheap. Its abundance 
and cheapness are among the prime conditions of civihzation. 



AGRICULTURAL OR RURAL ECONOMY. 213 

Long continued hunger drives men into savagery, if it does 
not even fill them with the ferocity of wild beasts. 

211. Agricultural products. — The products of agriculture 
are natural products — organic substances produced by the forces 
of growth. They are, therefore, but partly under the control 
of human skill, and can not be indefinitely multiphed and 
cheapened by the division of labor and the employment of 
machinery. This gives to them a certain steadiness of value, 
without which their low prices would still oftener entail ruin 
upon the producers. 

The products of agriculture, taken as nature gives them, 
are heavy, bulky, and very perishable. To harvest and house 
them, and to store and transport them, often require more 
than double the labor and expense of their production. Huge 
barns and store-houses are demanded for their preservation; 
and their transportation to the distant markets, where their 
utilities can be enjoyed before they begin to deteriorate or de- 
cay, employs the majority of the carrying machinery of the 
world. Some of the heavier products, like hay, potatoes, and 
other root crops, will not pay the expense of the long trans- 
port from the farms to the distant railroad station, and thence 
to the more distant city, except in seasons of scarcity. In 
some of the new states of the West, Indian corn was, for 
some years, burnt as fuel, it being cheaper than coal, and the 
finer grains have been sold at five cents a bushel, and even 
given to those who chose to harvest them, because they would 
not pay for the transportation. The farmer is often compelled 
to see the transportation company, take the whole profits of 
his harvest, and leave him to suffer the loss of much of 
the expense of raising it. Wise and skillful farmers, distant 
from markets, give to their products the more concentrated 
form of meats, wool, or butter and cheese, and thus escape 
the serious tax of transportation. 

212. The materials and forces of agriculture. — Agri- 
culture uses, as the materials of its manufactures, the common 



214 POLITICAL ECONOMY. 

dust — that ground-up, pulverized debris of rocks and dead or- 
ganisms which, in itself, men call dirt, but which, as soil, con- 
stitutes the mightiest machinery known to human arts. Through 
this soil, warmed with the sun and watered by the rain, work 
those mysterious vital forces which annually crowd its surface 
with living products, more varied in form, more wonderful in 
structure, and more immense in quantity, than all the products 
of all the mechanic arts and of all the manufacturing ma- 
chinery of the world. In this mightiest of laboratories, these 
subtile forces, unwatched and unaided, transmute the most 
worthless of all materials— the earth's foulest dirt — into the 
thickly packed herbage, the darkling forests, and the immense, 
life-sustaining harvests; and then another set of forces, by a 
second and higher transmutation, build from these the living 
flesh^and tissues — the varied and beautiful forms — of sentient 
and self-moving animal tribes. 

The real substances entering into the products of agriculture 
are the few chemical elements, minerals and gases, found in 
the soil and the air, which go to make up vegetable and ani- 
mal tissues. The ground is but the reservoir and mixing place 
for these substances, and the substances themselves must often 
be sought in the form of fertilizers, in distant lands and places. 

The common manufacturer and mechanic buy their materials 
in definite quantities, and measure accurately the amount which 
goes into each product. But the farmer must often work in 
the dark, both as to the kind and amount of materials required 
for a given harvest. His only alternative is to make and keep 
his soil as rich as experience tells him is required for the best 
results. 

213. The extent of agriculture. — The wide extent of the 
agricultural industry— the innumerable hosts of its proprietors 
and laborers, spreading through all lands, and occupying the 
habitable surface of the globe, — is one of the most important 
of its economic features. All other industries are limited to 
easily ascertained bounds. The estabhshments in operation, 



■AGRICULTURAL OR RURAL ECONOMY. 215 

the capital employed, the number of laborers and the pos- 
sible limits of production, are all written down in the tables 
of the statistician; but who can count up the world's produc- 
tive energies, or tell, at any moment, the number or power 
of that world-engirting host who till the soil, gather its har- 
vests, and feed its millions of domesticated or protected ani- 
mals? Of all the industries, agriculture alone claims the whole 
world as its workshop, the habitable globe as its market place, 
and mankind as its customers. 

Statistics will best show the enormous extent and power of 
this great field of industry. In the United States, in 1870, 
out of 12,505,923 over ten years of age, engaged in all occu- 
pations^ 5,922,471, or nearly one half of the whole number, 
were engaged in agriculture. In France, according to the 
census of 1872, 18,513,325, or over fifty-two per cent of 
the population, were counted as rural — that is, as agricult- 
ural population, 9,097,758 being land-owners Hving on their 
estates. In England, the great manufacturing nation, in 1871, 
only one person in twenty was an owner of land; in Scotland, 
one in twenty-five ; and in Ireland, one in seventy-nine. Only 
one ninth of the population is engaged in agriculture ; but in 
the great colonies of the British Empire, the agricultural in- 
dustry assumes its necessary prominence and sway. England 
itself must be regarded as the small corner of the empire into 
which the great mass- of its manufacturing industries have been 
crowded. In Germany, in 1875, sixty-two per cent of the 
population was given as rural population; and it was stated 
that three tenths of the people were directly supported by 
agricultural employments. Among the immense populations 
which crowd Southern and Eastern Asia, agriculture is the 
great staple employment, in a sense and to an extent unknown 
to the western nations. 

The aggregates of agricultural wealth are equally instruct- 
ive. The estimated cash value of the farms of the United 
States, in 1880, was $10,197,096,776; of farm implements and 



2l6 POLITICAL ECONOMY. 

machinery, $406,502,055, and of all kinds of live stock, 
$1,500,464,609, giving a grand total of agricultural capital 
of $12,104,063,440, or about one third of the entire accumu- 
lated wealth of the country. 

The aggregate production of seven of the principal food 
crops, in 1880, was 2,885,853,071 bushels, valued at $1,442,- 
559,981. Of these the Indian corn was 1,717,434,543 bush- 
els, the wheat was 498,549,868 bushels, and the oats, 417,- 
885,380 bushels. Adding to these the crop of hay, tobacco, 
and cotton, and the value was carried up to the enormous 
total of $2,131,051,859. 

This very immensity of its fields and operations gives to 
agricultural values, taken through a series of years, a steadi- 
ness not known to the products of other industries. It is true, 
as- heretofore stated, that glut of markets may more frequently 
occur in food suppHes than in manufactured goods, for the 
reason that the supply is necessarily always so near the de- 
mand that a comparatively small over-production may over pass 
the need, and because that a surplus can not be so easily 
withdrawn from market and held in store. It is this, together 
with the immensity of its masses, and the universality and con- 
stancy of demand, that have made the products of agriculture 
favorite objects for speculators and trade gamblers. 

214. Economic factors. — Nature's gifts. — In agricult- 
ure, as in all other branches of industry, the economic fac- 
tors are nature's gifts, labor, and capital. On the nature and 
relation of these three, its economic problems depend. 

The gifts of nature, in agriculture, are large in amount and 
peculiar in character. Nature not only furnishes the materials 
and forces for the work, but also produces the results. Nat- 
ure works by the side of the man, and does by far the largest 
and most important part of the labor. The man employs, 
urges, and superintends nature. She supplies the materials, 
does the work, and determines the products; but the human 
hand must intervene, and, as the skill of the agriculturist 



AGRICULTURAL OR RURAL ECONOMY. 217 

rises in rank, the products become more and more changed 
from their natural forms, and are increased iji amount and 
value. The finest fruits, flowers, grains, and cattle, though 
natural products, are such as nature could never have pro- 
duced unaided and undirected by man. 

Land, soil, seed, air, sunshine, water, and the forces of 
growth, all come from nature, and, like all of her gifts, they 
are gratuitous and without economic value, till the hand of 
man has done its work upon them. But, though requiring the 
element of labor to turn their utilities into marketable values, 
the intelligent agriculturist will take careful note of the vari- 
eties of soil, situation, cHmate, and other conditions affecting 
the kind and amount of his harvests. In all industries, nat- 
ure's favoring laws and conditions must be carefully studied 
and obeyed; but in agriculture, above all, nature must be 
read and followed. The elevation and slope of land, the 
presence in the soil, or in convenient proximity, of the fertile 
elements required, the convenience of markets, the cost of 
transportation, the rain-fall and other climatic phenomena, 
though gifts of nature, are economic conditions of vast impor- 
tance, and can not be disregarded by the farmer, or by the 
economist, who studies this industry. 

2i5yFarm labor\-The labor required in agriculture is, 
in large measure, of low grade in its skill. It is chiefly mere 
common labor, which any strong man can learn to do with 
but little practice, and which, Hke other cheap labor, can not 
give great value to its products. Even farm proprietors and 
managers are often men of little intelligence or skill; and their 
success corresponds. 

/To insure success, the farmer needs much knowledge and 
skill. It is unfortunate for the agriculture of this country 
that the opinion so widely prevails, throughout our farming 
communities, that no great degree of education or of intelli- 
gence is necessary to make a successful farmer. It is true 
that, by dint of hard work and close economy, many farmers 

p. E.— 19. 



2i8 . POLITICAL ECONOMY. 

make a moderate living, and in the long run of the years ac- 
cumulate some property; but with a wider intelligence, with 
the business tact necessary in all callings, their gains would 
be much larger, and their fortune much speedier and more 
ample. Nowhere among human employments is wide knowl- 
edge more needed, and nowhere will education pay better 
than in the pursuit of agriculture. Skill and intelligence win 
sixty and eighty bushels from the acre, where ignorance scarce 
gets twenty; and the soil which refuses to be subdued by un- 
intelligent labor, yields the richest harvests to him who knows 
its constituents and understands its proper managementN 

Much of the labor of agriculture is performed by animals. 
This labor, though cheaper than human, is more costly than is 
generally supposed. The original cost of the animal, the ex- 
pense of its care and keeping, unintermitted through all weath- 
ers and all seasons, the liability to injury and disease, and the 
short period of its working life, if taken into account, would 
show its costliness. But to all this must be added the wages 
of the driver, usually one to each two horses. Estimates, made 
in England, from actual cases, show that the annual cost of a 
single horse, in use on the farm, is forty-five pounds sterling, 
or $218.70. This includes the cost, or annual wear, of har- 
ness and implements necessary to utilize the horse, the annual 
depreciation of the animal, and the wages of the driver. 
The feed of the horse, which, in this estimate, is counted at 
$106 a year, may be something less in America; but the wages 
of a driver, which are put at $155 the year, would be, here, 
including board, $300 or more, or $150 for each animal. 
Careful estimates, made from actual experiments, show that 
the steam-power used, in England, in many farm operations, 
costs scarcely more than one half as much as horse-power, for 
the same purposes. 

//Another peculiarity of farm labor is the slight extent to 
which the division of labor is applicable to its work. This 
organization of labor which, as we have seen, has lent to the 



AGRICULTURAL OR RURAL ECONOMY. 219 

manufacturing arts much of their enormous increase of pro- 
ductiveness, scarcely finds place at all in agriculture. Farm 
operations are distributed through successive seasons of the 
year, and are not usually divisible into separate processes 
which may be assigned to different laborers, differing in strength 
and skill. The introduction of machinery, such as the mower, 
the reaper, and the thresher, has greatly assisted and hghtened 
labor; but the fields must still be plowed, the seed planted, 
and the harvests gathered, each in its own season; and so the 
plowman must also serve as seed-sower and harvester. The 
wiser diversification of farming, and the introduction of farm 
manufactures, may, perhaps, help to economize labor by vary- 
ing its demands, and by furnishing both steadier and more 
varied employments, but farm labor must forever remain largely 
unorganized laborX^ 

216. Farm capital. — The capital required in agriculture is, 
necessarily, large in amount, in proportion to the labor em- 
ployed. It consists chiefly of the following four classes : 
I. The land and its appurtenances and improvements; 2. Live 
stock of all sorts; 3. Farm implements and machinery; 4. Seed 
and supplies, including money to pay wages and other running 
expenses. 

The land is the farmer's chief instrument of production, and 
in this country constitutes too often the chief part of his capi- 
tal. The true nature of land values, and the chief sources of 
productiveness in land, have already been noticed in Chapter 
IX. We are to study it here as a part of the capital of agri- 
culture, in which we are chiefly concerned with the soil as the 
residence of certain plant-producing forces. 

In England, the land-owning class is usually distinct from 
the farmers. The latter usually rent farms, and the land 
constitutes no part of their capital, — they pay an annual rent 
for its use. But in the United States, the farmer nearly always 
owns the land which he cultivates, and its value* is to be 
counted as a part of his capital. The average American 



2 20 POLITICAL ECONOMY, 

farmer, engaged in mixed husbandry, has frequently from 
$8,000 to $10,000 invested in land, and not more than from 
$1,500 to $4,500 in capital of all other kinds. The Enghsh 
farmer, owning no land, is expected to have a working capital 
of twenty-five dollars to fifty dollars an acre, invested in teams, 
implements, -cattle, and ready money. The difference is strik- 
ing and important. 

In Illinois, which may be taken as a fair illustration of the 
agricultural states of America, in 1870, out of a total of 
202,803 farms, a little more than one fourth of all, were from 
twenty to fifty acres each; the largest number in one class 
were from 50 to 100 acres each. As it is customary to pre- 
serve, in the farms, the government subdivision of lands into 
40, 80, 160, and 320 acre tracts, it is probable that the farms 
of the first class were mostly forty acre farms, and those of the 
second class, eighty acres each. There were 65,940 farms em- 
bracing 100 to 500 acres each, which would include the 160 
and the 320 acre farms; and only 1,669 farms of over 500 
acres each. 

The cash value of the farms was $920,506,304. The re- 
maining agricukural capital, including farm implements and 
machinery and live stock, was only $182,333,285, being less 
than one fifth of the value of the land. The average value of 
the land was about thirty-seven dollars the acre; the average 
working capital employed in its cultivation was but little above 
fourteen dollars per acre. It is often not more than five dollars 
an acre. 

The native fertility of the soil goes but a little way in the 
production of successive crops; and this fertility is, in most 
lands, soon diminished, if not wholly exhausted. The land 
then becomes, as it were, the naked workshop, into which 
both materials and labor must be imported. The two chief 
agencies on which farming must rely for its harvests, is the 
labor spent in cultivation and the fertilizers employed. Most 
of the present fertility of the old and well cultivated farms is 



AGRICULTURAL OR RURAL ECONOMY. 221 

the product of former labor and fertilization, and this will be 
speedily exhausted if not renewed by similar means. FertiHty 
must, therefore, be counted as an artificial product, like the 
machine by which it is worked — as having, like that, cost 
labor, and needing, like that, to be renewed. The soil of En- 
gland, some centuries ago, produced six bushels of wheat per 
acre ; the same soil now, with more labor and with costly fer- 
tilizers, produces an average of thirty-two bushels, and not 
unfrequently over forty bushels. 

The average yield of wheat, per acre, in the United States, 
in 1880, ranged from 4.8 bushels in South Carolina, to eight- 
een bushels in Connecticut; the average in Illinois, the chief 
wheat-growing state, being 16.7 bushels; and that of California, 
whose climate and soil are claimed to be peculiarily favorable 
to this cereal, being sixteen bushels to the acre. If now, in 
England, we count the six bushels as the product of the bare 
soil, unaided except by the necessary plowing and seed sow- 
ing, we may consider the remainder, twenty-six bushels, as 
the direct product of labor and fertilizers. 

217. Extensive and intensive farming. — In Europe, 
agriculture is known as "extensive" and ''intensive." The 
former is that in which the amount of labor and fertihzers is 
moderate. Land, in this class, is used in large extent, and the 
reliance for profit is placed chiefly upon the fertility of the soil. 
In the latter, the "intensive cultivation," the aim, as a French 
writer states it, is to use as little land and as much labor and 
fertilization as possible. The crops raised under this latter mode 
of cultivation are often of surprising amount. The "extensive" 
form of agriculture is found upon large farms, like those of 
England and the United States. The "intensive" is confined to 
small farms of five to ten or fifteen acres, chiefly found in France 
and Belgium. In the latter country, sixty tons of manure are 
not unfrequently applied to a single acre ("Encyclopaedia Bri- 
tannica"), and the yield is correspondingly liberal, — twelve to 
fifteen tons of potatoes are an ordinary crop for a single acre. 



22 2 POLITICAL ECONOMY. 

Intensive agriculture is almost unknown in the United States, 
except in what is called market gardening. ' ' Land is cheap 
and labor dear." Such has usually been given as the explana- 
tion; but it ought to be understood that it is the labor and not 
the land that produces the paying crops. It is rather the lack 
of working capital, to be used in the payment of wages and 
fertilization, which has most frequently compelled the Ameri- 
can farmer to keep to that exaggeration of the "extensive" sys- 
tem, which sometimes spreads the labor of a single man and 
team over eighty acres of land. 

218. Capital in live stock. — Of the forms of agricultural 
capital, that which stands next to land in amount and impor- 
tance is the live stock. This is of two kinds: the draft ani- 
mals, and those kept for their flesh and products. The ox 
holds a place in both classes, as he may be fattened for beef if 
not wanted for work. 

The draft animals — horses, mules, oxen, and rarely cows — 
are the indispensable power for driving much of the farm ma- 
chinery. But, as they have already been discussed, they may 
be passed here without further remark. 

Of the stock animals, the beef cattle and swine are kept for 
their flesh alone. Their economic use is twofold: i. They 
consume the grasses and coarser grains, and turn them into 
valuable meats, much less bulky and more easily transported 
to market; 2. They furnish fertihzers for the land. Both of 
these sources of profit are too well known to need discussion. 
No maxim of modern agriculture is better established than that 
which affirms the necessity of animals for profitable farming. 
*'No cattle," says the Flemish proverb, "no manure; no 
manure, no crop." 

Cows and sheep are kept for their products — the milk and 
wool. The economic problem is the same in their case as that 
of the other stock mentioned, except that there is, in these 
animals, a double source of profit — their products and their 
flesh. 



AGRICULTURAL OR RURAL ECONOMY. 223 

Stock-breeding, or the rearing of fine animals of pure blood, 
as it is called, has still another source of profit, as the animals 
raised have, in addition to their ordinary value as meat, 
milk, or wool producers, their use in improving the stock of 
the country. 

As capital, the farm animals kept for feeding are both ma- 
terials and machinery. As a living machine, they serve to 
transform the bulky grasses and grain, or roots, into compact 
and valuable meats; but the animal itself is the product sought, 
and, while growing, may be considered as material undergoing 
change. Costing more labor, care, and skill than crop-raising, 
the product, following the general laws of value, is worth 
more, in proportion to its mass, than the common field crops. 

219. Machinery and supplies. — Of the other forms of 
agricultural capital — the implements and supplies — only the lat- 
ter need be mentioned with comment. As the products of ag- 
riculture require, in general, the year for their ripening and 
harvesting — animals often requiring several years — the farmer 
and his hands will need means of support for that time. As 
different crops come in at different seasons, this support need 
not be entire ; but to pay wages, buy provisions, and keep ma- 
chinery in repair, will necessarily cost large expenditures, and 
these must enter into the capital provided. The custom of 
many farmers, of getting credit at the merchant's for these sup- 
plies, is only another way of borrowing this part of their neces- 
sary capital; and the borrowing is, usually, at a high interest, 
since it not only gives, commonly, a higher price for goods, 
but often puts the farmer under obhgation to sell his crop as 
soon as harvested, without regard to the condition of the 
market. 

220. The economy of forces. — The profits of agricult- 
ure, so far as production is concerned, come from the econ- 
omy of forces. In the light of a true science, the processes of 
farming are force-transforming and force-storing processes. In 
raising a crop of grass, a part of the forces of the soil and 



2 24 POLITICAL ECONOMY. 

atmosphere are stored up in the vegetable tissues of the grass. 
In feeding this grass to cows, some of the substance and much 
of the forces pass into the flesh of the animal, or are secreted 
into milk; the remainder is excreted to return as a fertihzer to 
the soil. In the beef animal and swine, they are transformed 
into flesh and fat, in which forms they have high utility for 
man as stored-up food or force for his body. If to the soil we 
add, in cultivation, the fertilizers and the labor of man and 
animals, we look to see these returned to us in a larger harvest 
of the force-storing crops. There can be no profit unless 
the forces produced are more valuable in amount and kind 
than those expended in producing the crops. All forces not 
used are wasted. When the force produced is not equal in 
amount and value to that expended, there is a loss. 

221. Economic mistakes, — The common economic mis- 
takes in American agriculture, judged from the stand-point of 
the conservation of forces, are : 

1. The waste of land— the attempted cultivation of large 
farms with wholly inadequate forces. The productive power 
of the soil is but partially developed, and the working force is 
largely wasted by an attempt to spread it over too large a sur- 
face. The average corn crop of Illinois, in 1880, was only 
27.2 bushels to the acre. The constant average of well-worked 
farms was sixty to seventy bushels the acre, or more than 
twice the general average. If a farmer uses one hundred 
acres to produce the crop which he might as easily get from 
fifty, he not only loses the use of fifty acres, on which he must 
pay taxes, and sacrifice interest, but he wastes time and work- 
ing force in traveling over the double area. In addition to 
this loss, the larger area must be kept fenced and free from 
weeds, and must be provided with roads, and kept under 
supervision. 

2. T/ie waste of animal forces. — If the farmer would take 
into account the cost of creating and maintaining the animal 
force which his teams exert, as shown in section 219, in this 



AGRICULTURAL OR RURAL ECONOMY. 225 

chapter, he would easily see how large a loss is possible to him 
from the misapplication or non-use of this force. The loss of 
power by the use of poor implements, the draft of which 
is needlessly heavy; the loss by the bad roads, which prevent 
the carrying of full loads, or needlessly exhaust the strength of 
the team; the loss by the long hours and many days of idle- 
ness, during which the strength of the team goes to waste un- 
used; the loss by bad feeding, either starving or over-feeding, 
by which the animal is not kept up to its full strength, or is 
partly disabled by its own fat; and the loss by bad care, bad 
management, and bad driving; all these diminish the profits of 
the ordinary farm to an extent little suspected by the average 
farmer, 

3. The want and waste of capital. — The absurd notion that 
the farmer needs little if any capital besides his farm, his 
teams, and tools, has cost many a farmer dearly. Many hold- 
ing this view expend every little surplus they gain in the 
purchase of more land, or put it at interest, as if not needed 
on the farm. The experience of English farmers has proved 
that a large wprking capital is one of the most necessary condi- 
tions of success ; and the wiser English land-owners will not let 
their lands to a farmer who can not show that he has a capital 
equal to twenty-five dollars or thirty dollars for each acre of 
the land he proposes to farm. The working capital, on an 
American farm, ought to be equal, ordinarily, to the value of 
the land itself. This capital, wisely used in labor, in fertiliza- 
tion, in animal force, and in marketing the products, would 
make the one farm worth two run in the ordinary way. 

4. The waste by poor or insufficient stock. — The feeding of 
animals of inferior stock often costs as much as those of better 
breeds. The animal, as we have seen, is a machine to 
manufacture more valuable products out of the vegetable pro- 
ductions of the farm. The animal that will consume most, and 
will produce from its food the largest amount and most valu- 
able quality of products, is the most profitable. This is as 



2 26 POLITICAL ECONOMY. 

evident as it is that the loom which will produce the most 
and the best cloth with a given quantity of wool and work, is 
the most valuable. The farm inadequately stocked will be 
obliged to buy fertilizers from abroad, and will also be com- 
pelled to send its products to market in the most bulky forms 
and at the largest expense for transportation. 

5. The waste by improper rotation. — It is a common mistake, 
in American farming, to confine its cultivation to a few of the 
common grains. The common rotation of crops, in some parts 
of the country, is corn, oats, and grass; in others, corn, wheat, 
and grass, with potatoes, as a limited crop, occupying small 
fields. Rye or barley are sometimes substituted for the wheat 
or the oats. Without pausing here on the question of the 
proper rotation of crops, which belongs rather to agricultural 
than to economic science, it may be noted that/the failure to 
diversify agriculture, by a greater variety of cultures, fails : 
I. To bring all the powers of the several kinds of soil into 
use; 2. To give the variety and continuity of labor desirable; 
3. It leaves the farmer dependent on a few crops, with their 
liability to failures; 4. And cuts him off from that wider 
mastery of his art, which, making him familiar with many 
cultures, gives him choice of all, and almost certainly would 
give him greater expertness in each. 

. The objection will be made that men usually do best to con- 
fine their attention to a single business or a single branch of it 
even. This is true where large experience is required for the 
mastery of the one business, and when the attention required 
by the one branch forbids giving attention to the others. But 
it is easy to the farmer to select, out of tlie wide range of cult- 
ures possible to his soil and situation, those which shall be 
adapted to his lands, to his markets, to his working forces, and 
to each other. And all this is consistent with his giving his 
attention chiefly to one branch of farming, as sheep husbandry, 
cattle-raising, or grain cultureX On great estates of several 
hundred acres, the plantation system of devoting the whole to 



AGRICULTURAL OR RURAL ECONOMY. 227 

some one culture can be profitably introduced. The extent of 
the enterprise permits the economies of great manufactories to 
be used, and the losses on some points will be more than cov- 
ered by the profits on others; but in ordinary farming the 
profits must come from several sources, and many economies 
imist be practiced to secure the best results. 

The relations of agriculture, as one of the largest groups 
of the world's industries, (i) to the world's populations, (2) to 
the other great classes of industries, (3) to the markets and 
(4) to governments, involve economic questions of the deepest 
importance. The full discussion of these questions would de- 
mand several chapters. They are indicated here only to show 
the scope which must be given to a full discussion of the field 
of rural or agricultural economy. \ 

The importance of the food supply to national safety and 
independence, and to the peace of the people and the progress 
of civilization, must forever give to agriculture a prominent 
place among the industries, in the esteem of statesmen, and 
in the care of all wise governments. 



CHAPTER XX 



EXCHANGE, TRADE AND TRANSPORTATION. 

222. Tabular view. — The following synoptical view will 
aid us in the clearer discussion of this branch of economic 
science. 



Nature and benefits of exchange. 
Labor. 



Transportation 



Trade or exchange. 



Capital. 
Profits. 
Risk and insurance, r Primary. 

Markets < Principal. 

Market prices. I Final. 

Cost of transportation. 

{Barter — goods for goods. 
Hire — services for goods. 
Sale — goods for price. 

. f Its peculiarities. 
Foreign trade. I j^^^^^^^^^ 

Domestic trade. 

Balance of trade. 

[ Medium — money. 



223. Needs and benefits of exchange. — The life of 
man is confined mostly to one place. The satisfactions of his 
wants come from the round globe. Sitting in his own house, 
or working in shop or field, he asks from all lands and all 
chmes, the comforts of his life and the materials for his arts. 
Few of the articles which appear upon his table or person, 
which furnish his house or are used in his work, come from 
his own immediate labor. From his neighbors to the unknown 
dwellers in the most distant lands, he asks from myriads their 
(228) 



EXCHANGE. 229 

products; and as he expects nothing for the mere asking, he 
must send to all his own products or their values in return. 

Out of this localization of man's life, and this wide stretch 
of his needs, comes the necessity of the third great branch or 
family of industries — those of transportation and trade — whose 
business is the carrying and exchange of goods. These in- 
dustries might properly enough be called the "errand doing" 
of the world. How many and distant and difficult the errands 
which man needs to have done ! How vast the labor and skill 
and care required to take the productions of any one clime or 
land and distribute them to every other land, and to bring 
back in exchange the products of all the others ! 

The importance of these industries to the world can not be 
overestimated. Not only the comforts of life to the individual, 
but the very existence of society in its higher forms, depends 
on the ability of masses of population to draw their supplies 
from distant sources. Without this, cities would be impossible, 
and civilization must remain forever in its infancy. If man 
could not exchange his products with others, the industries 
would be confined to the poor and meager arts of savage 
life. The great and fruitful division of labors would be un- 
known; and wealth and national greatness could never exist. 
Even that larger form of freedom, coming from the power 
which his arts and his wealth give to man, must have remained 
an unattainable if not an unknown good. The boasted natural 
liberty of the savage is low in its purposes, as it is weak in its 
powers. It is hemmed in by poverty of resources, and hin- 
dered by savage dangers. Art and wealth give to freedom its 
wings, and open before it the fields of a larger, safer, and sub- 
limer life. The industry which breaks for man the barriers 
of his products, opens for him the world as his play-ground. 

The great boon of trade, to the individual man, lies in the 
fact that, with its aid he may labor where he lives, and yet, 
through a line of exchanges, may effect, in a hundred different 
places and distant lands, the production he desires. ''The 



230 POLITICAL ECONOMY. 

miner who, two thousand feet under ground, in the heart of 
the Comstock, is digging out silver ore, is, in effect, by virtue 
of a thousand exchanges, harvesting crops in valleys five thou- 
sand feet nearer the earth's center ; chasing the whale through 
Arctic ice-fields; plucking tobacco leaves in Virginia; picking 
coffee berries in Honduras; cutting sugar-cane in Hawaiian 
Islands; gathering cotton in Georgia, or weaving it in Man- 
chester or Lowell; making quaint wooden toys for his children 
in the Hartz mountains; or plucking, amid the green and 
gold of Los Angeles orchards, the oranges which, when his 
shift is relieved, he will take home to his sick wife. The 
wages which he receives on Saturday night, at the mouth of 
the shaft, what are they but the certificates to all the world 
that he has done these things — the primary exchanges in the 
long series which transmutes his labor into the things he has 
really been laboring for?" — Henry George, in ''Progress and 
Poverty." 

224. Two elements in exchange. — It is evident that this 
third branch of industries includes two chief elements : 

1. That of the exchange of goods. 

2. That of their change of place. 

Trade and transportation are but separate parts of the same 
industry. In all exchanges of property, except that of land 
and its appurtenances, the one commonly includes or presup- 
poses the other. We buy abroad what we wish to possess or 
enjoy at home. Even in the barter between neighbors, there 
must be a transportation of the goods bartered; and not uncom- 
monly the carrying and delivery of the goods is a part of the 
bargain. The corner grocer gets our custom because he brings 
to a convenient neighborhood the supplies we need. We pay 
him both for goods and transportation. 

But exchange and transportation are separable in fact, and 
they imply different conditions. The exchange of goods in- 
volves the measurement and comparison of the values ex- 
changed. The transportation includes not only the labor of 



EXCHANGE. 231 

removal from the place of production, to that of final use and 
consumption, but the protection of the goods on the road, 
and their preservation and storage. 

The risks attending the business are also double. They in- 
clude the hazards of transportation, — of loss, injury, and de- 
struction of goods in store or transit ; and also the chances of 
finding buyers at the required prices. 

225. Labor in exchange. — Human labor, which enters as 
the chief factor in ail industries, holds, in transportation and 
trade, a place of peculiar importance from the great variety 
and value of skill required. In the earlier ages, commerce 
was carried on by caravans, and goods were transported on the 
backs of camels, horses, and other animals, or even on the 
backs of men. The labor was large in amount, but usually 
low in grade. Now the steamship and railroad train are em- 
ployed on the larger routes, and the sail vessel and heavy 
wagons on the less. Much coarse and cheap labor, as of port- 
ers, stevedores, and teamsters is still required, but an unusual 
proportion of skilled men, as of captains and officers of vessels,' 
engineers, conductors, clerks, and business agents, is employed ; 
and, generally, these must be men of trust as well as of skill. 
To this must be added the vast range and variety of business 
ability required by merchants, brokers, bankers, and the man- 
agers of lines of transportation. 

The number of persons engaged in trade and transportation, 
in the United States, in 1870, was 1,191,238, or nearly three- 
sevenths as many as were engaged in all the manufactures of 
all kinds in this country. Besides these, it must be recollected, 
that much of the costly transportation of the heavy products of 
the farms, is made by the farmers themselves. Many man- 
ufacturers also transport their products and materials to and 
from the nearest markets or place of shipment. These counted 
in would enormously swell the amount and cost of the work of 
transportation. 

The average of business intelligence and skill required in 



232 POLITICAL ECONOMY. 

trade and transportation is higher than that employed in any- 
other of the branches of industry. The "railroad kings," the 
''merchant princes," and the "money kings," or bankers, all 
of whom belong to this great branch of the world's industries, 
are, as these titles, — given them less by popular love than by 
popular fear of their power, — indicate, the acknowledged leaders 
in the industrial world. Their subordinates are necessarily, to 
a large extent, also men of marked business ability and power. 
The keenest encounters of human minds take place in the ex- 
change of great masses of value, and in spite of their keen and 
practiced skill, and their frequently enormous profits, more 
men fail in this branch of industry than in any other. The 
risks of trade are incessant and immense. 

226. Capital in Exchange. — The capital of trade is also 
peculiar in character. Instead of being invested as in man- 
ufactures, in raw materials, machinery, and supplies, it may in 
general be divided into two great classes: i. That invested in 
the machinery of traffic, as ships, cars, railroads, vehicles, 
store-houses, and furniture; and 2. That invested in the goods 
to be transported and exchanged. These two classes of capital 
frequently belong to different owners, but both are to be 
counted in the capital of trade, and both seek their natural 
profits or returns in the enhanced value of the articles carried 
and exchanged. 

The capital invested in the machinery of transportation, 
however enormous in its gigantic aggregates, is, perhaps, not 
more costly in proportion to the work done by it than is that 
of the machinery of the manufacturer; and it is less, in this re- 
spect, than that formerly invested in teams and wagons for 
freighting. The steam-ship can carry cheaper than the sail 
vessel, and the railroad train than the horses and wagons, es- 
pecially when large quantities and long distances are in ques- 
tion. But ships and railroad trains encounter great risks, and 
their average period of service is small. 

The capital employed in buying goods to sell again is neces- 



EXCHANGE. 233 

sarily large; but, as it anticipates quick returns from speedy 
sales of a large part of the goods, it is supplied or supple- 
mented by credit, and may thus fall far short of the market 
value of the merchandise bought and sold. A merchant, with 
a capital of $10,000, may do an annual business of $50,000; 
but he necessarily assumes the risk of all the capital used. 
This risk includes all dangers to the goods themselves, and 
also the hazards of sale, increased largely by the competition 
which the very profits of his business bring into the field 
against him. 

There are obvious differences of wide extent between the 
different classes of commodities, as also between the different 
branches of transportation. They vary in risk, in the skill re- 
quired, and in the profits gained. But these are questions 
which belong to private economy rather than to economic 
science. 

227. Profits in Exchange. — The natural profits of trade 
and transportation arise, like those of agriculture and manu- 
factures, from an actual increase of values produced by an ex- 
penditure of labor and capital. It is a popular error that no 
values are created by transportation. The bushel of wheat re- 
mains a bushel of wheat after being carried across the ocean. 
It weighs no more after the transit than it did when thrashed, 
and will make no more loaves of bread. No goods change in 
quantity or quality by transportation. Whence, then, the 
change in value? 

The answer is easy. Let it be remembered that value does 
not consist solely in utility or the power to satisfy want. It in- 
cludes, also, the labor expended by its producer and saved to 
its purchaser. And it is not enough that the useful thing shall 
exist; it must be brought within the reach of those who need 
it. The coal-miner does not make the coal he digs; he merely 
fetches it to the surface where it is wanted. The fisherman 
finds his fish already grown ; he simply catches them and brings 
them to market. The creation of values in both of these cases 

p. E.— 20. 



234 POLITICAL ECONOMY. 

comes solely from the change of place effected by the labor. 
In the same way the transportation of wheat, from Chicago to 
Liverpool, takes it from a place where it was not wanted, be- 
cause it was a surplus, to the place where it is needed, and 
this transportation gives it, therefore, a value which it did not 
have before. 

The merchant who sells wheat and other goods to the con- 
sumers, completes the work of the transporter. He collects the 
various wares in which he deals, displays them at a convenient 
place for his customers, and waits there to furnish the goods at 
their convenience. He performs necessary labor and saves 
such labor to the purchasers; hence, he, in part, produces the 
values which he sells. 

In* trade and transportation, much more frequently than in 
the other branches of industry, the monopoly power exists, 
and the trader and transporter are left to make their own 
prices, little checked by competition. The occasional abuse of 
this power by traders, and especially by the great transporta- 
tion companies, has, doubtless, been the source of much of the 
odium which has been cast upon them in the popular esteem. 
That the profits of these branches of industry are less in 
amount and in security than is generally supposed, is suffici- 
ently proved by the frequent and numerous failures registered 
among them. The splendid fortunes achieved, in rare in- 
stances, by men of peculiar aptitudes for trades, blind the 
eyes to the more common failures. An old cashier of a 
Boston bank said, that in reviewing the names of merchants 
on the books of the bank, he found only two per cent 
who had been finally successful : all the others had failed in 
business. 

228. Risks in Exchange, — Besides the labor and capital 
employed in transportation and trade, there is another source 
of profit in the risk involved. Risk is the danger of loss from 
any source, and it is measured by the percentage of actual 
losses ascertained by careful observation. If it is found^ in any 



EXCHANGE. 235 

business, that one attempt out of every hundred, in that busi- 
ness, proves unsuccessful, the risk is one per cent. It is evi- 
dent that the cost of the failures must be charged as a part of 
the true cost of the successes. If out of every hundred cargoes 
shipped, only ninety-nine come through in safety, the cost of 
bringing the ninety-nine is the shipping the hundred. The 
hundred shipped may be regarded as the cost of the ninety- 
nine saved. 

As already stated, trade has two classes of risks : the risks 
of transportation, and the risks of sale. To meet these risks, 
the trader must add something to the price of every article 
which he sells. If this additional charge exactly covered and 
made good the losses, no profit would ensue from it; but as 
the risks are uncertain, the trader estimates them at their high- 
est, and then seeks, by care, to reduce them to their lowest 
limit, and thus often secures a profit where he might have met 
a loss. 

229. Insurance. — Out of risks of various kinds has grown 
the business of insurance. Insurance trades on risks. The in- 
surer assumes the risks to a stipulated amount, and relieves the 
insured to that amount, for a sum of money which he calculates 
will cover the risks, and leave him a profit. If the average 
loss of cargoes, by sailing vessels, is found to be one in a 
hundred, then he may insure a hundred cargoes for the price 
of one plus the profit required to cover labor and capital em- 
ployed. If by carefully excluding unseaworthy vessels from 
insurance, and by insisting on precautions which may help to 
prevent loss, the insurer loses only one risk out of two 
hundred, he may, evidently, lessen his charges or increase his 
profits. 

Insurance has now been extended to losses by fires, losses 
of health and of life, and to the dangers in travel and in other 
situations in life. In trade, the insurance can cover only the 
risks by transportation, and in store. The chances of sale 
must still be taken by the trader himself, and he must make 



236 POLITICAL ECONOMY. 

the profits on goods sold cover the losses on goods found 
unsalable. 

The economic effect of insurance is to distribute the losses 
upon all the parties insured. The ninety-nine saved cargoes 
pay for the one lost. This has .suggested the plan of mutual 
insurance, in which the parties insured agree to share the losses 
occurring among them. This, doubtless, would be the cheap- 
est and most equitable form of insurance, if it could be carried 
out on a scale sufficiently large, and be conducted by an agent 
sufficiently expert and trustworthy. 

230. Markets. — The business of exchange involves the ex- 
istence of markets. The very nature of modern trade, in its 
widest meaning, demands great outlets or markets for goods; 
and modern agriculture and manufactures are equally involved 
in the question of markets, in the broader sense of the term. 
The one incessant and always growing need of the industries 
is the need of markets; and from no source comes so large a 
danger and difficulty to the great manufacturing nations as in 
the loss, or fluctuations even, of their accustomed markets. 

In earlier times, markets were places where producers, at 
stated times, brought their products and exposed them for sale. 
The word is still used in this restricted sense, in our cities, to 
designate the places where meats and vegetables are offered for 
sale at certain hours or days. Gradually the word outgrew its 
first meaning, and came to imply the general offer and demand 
for goods of any given sort. Thus, we speak of the market for 
coal or for breadstuffs, meaning the general demand and offer 
of these goods. Economic science employs the term in this 
broad general sense, in its discussions of the laws of demand 
and supply.. There is another use of the word in which the 
notion of place is restored, but in an enlarged sense; as when 
we speak of the Liverpool, the London, or the New York 
markets, or of the English, the French, and the American 
markets, meaning the offer and demand for goods in the cities 
and countries named. 



EXCHANGE. 237 

231. Three classes of markets. — In trade and transpor- 
tation, three classes of markets need to be considered : 

1. Primary mm^kets, where the producers sell their products. 

2. Principal 7na7'kets^ to which the great mass, or the surplus, 
of products must flow. 

3. The final markets., where the actual consumers find their 
supplies. 

Take, for example, the" wheat crop ; the primary markets are 
the stations where the farmers sell and deliver their wheat. 
The principal wheat markets are the great centers of distribu- 
tion, such as New York and Liverpool, to which all surplus, 
after the supply of the home and local demand, must go. The 
final wheat markets are the innumerable places of manufacture 
and retail to which the wheat is distributed to be ground into 
flour, or sold to its consumers. 

In tracing the history of the wheat marketed, from the field to 
the ovens and tables, we shall see it first carted to the nearest 
town or station, and sold to the wheat buyers, the farmer re- 
serving enough for his own use as food and seed. From the 
first buyers it goes forward, through, perhaps, other buyers, to 
the great central or distributing market, leaving by the way 
enough to meet local demands. To this central or principal 
market, the millers and retailers send to purchase the supplies 
for their several localities. Through these the wheat, or flour 
manufactured from it, reaches at last the consumers. 

232. Market prices. — Market prices wiU be ruled by the 
principal or central markets. Take Liverpool, for example, as 
the principal market for American wheat, because it is the 
market to which most of our surplus is sent ; the quotations of 
prices at Liverpool control, in large measure, the prices at 
New York, Chicago, and so on to the wheat buyer at the little 
railroad station, a thousand miles away. It is true that only 
a small part of the wheat crop of the Unites States, say 
50,000,000 out of 400,000,000 of bushels, seeks the EngHsh 
market; yet, as the surplus must seek that market, the prices 



238 POLITICAL ECONOMY. 

offered for that surplus will, by a natural law, control the gen- 
eral prices of all. The Liverpool prices of wheat are l:)ased 
upon calculations of probable supplies from all sources, home 
and foreign, — upon the prospects of crops in England, in 
Turkey, Russia, the United States, and all other countries from 
which England is accustomed to draw its supplies. This price 
once established, becomes the ruhng price for New York and 
Chicago, modified by the expenses of transportation, and by 
any prospects of change, known to the dealers in these latter 
cities. 

The prices in Liverpool and New York must also control the 
retail prices of all who draw their supplies from these centers. 
Thus, the principal market controls the prices of all primary 
and final markets. Local influences, competition, speculation, 
unexpected supplies or demands, and variations in cost, or in 
means of transportation, may produce many fluctuations above 
or below the price of the principal market, but the tendency is 
always to settle back to that price. The central or principal 
market may, indeed, be regarded as the real market; the 
others are but its outpost agencies of purchase and sale. 

233. Who pays the transportation?— Who pays the 
transportation ? This is one of the questions asked of the econ- 
omist, and which this division of markets helps to answer. It 
is generally supposed that all expenses reappear as a part of 
the cost, and are paid in the end by the final purchaser, or 
consumer. Such, indeed, is the general law when the labor 
expended by the producer is equaled by the labor saved the 
purchaser. The price established in the principal market is 
supposed to measure the cost *of the cheapest supplies. The 
producer, or his agents, must deliver the goods in market at 
that price or fail to sell. If this price covers the cost of pro- 
duction and transportation, then that cost is carried forward to 
the consumer; but if it falls short of the cost, then the pro- 
ducer must bear the loss. If, for example, wheat is sefling in 
Liverpool at one dollar and a half the bushel, the American 



EXCHANGE. 239 

dealer must deliver his wheat there at that price, if he wishes 
to sell it there. He pays his transportation out of the price he 
gets, whether he gains or loses by it. 

The retailer who buys goods in the principal markets, trans- 
ports them to his place of sale and adds the cost to the price 
charged the consumer. 

The law of cost of transportation may then be stated as fol- 
lows: The producer delivers the goods in the principal market; 
the consumer takes them from the principal market. The line 
of dealers between the producer and the principal market on 
the one side, and between the principal market and the con- 
sumer on the other, are to be counted only as the agents of 
the producer and the consumer. If the principal market price 
covers the full cost of transportation, as well as of production, 
then this cost is transferred to the side of the consumer. 



CHAPTER XXI. 



TRADE. 



234. Forms of trade. — Trade, in its fullest sense, is the 
exchange of values. The possible forms of exchange, fully 
stated, are as follows : 

1. Goods for goods, or barter. 

2. Goods for money, or sale. 

3. Money for goods, or purchase. 

4. Use for money, or leasing, letting, or giving for rent. 

5. Money for use, renting, or taking for rent. 

6. Use for use, exchange of uses. 

7. Service for goods or money, or hiring out. 

8. Money or goods for service, hiring, or employing. 

9. Service for service, or exchange of services. 

The last three are not usually known as trade, but may come 
under that term in its largest sense of exchange for advantage 
or profit. 

All these forms of exchange may be reduced to three princi- 
pal classes : 

1. Barter, or the exchange of goods for goods, as when the 
farmer exchanges his butter or hay for clothes or groceries, or 
trades horses with his neighbor. 

2. Sale, or the exchange of goods for a price, usually in 
money. Every sale is also a purchase, on the other side. 

3. Hire, or the exchange of use or service for goods, wages, 
or rent. 

In the end, all exchanges are exchanges of goods or services. 
(240) 



TRADE. 241 

Exchange for money is only one link in the chain. Money is 
desired, in this case, only as a convenient means of effecting 
further exchanges. 

235. Comparison of values in trade. — All trade ex- 
changes involve a comparison of the values exchanged in 
barter. This comparison is of that of a present estimate made 
by the two parties to the exchange. When the comparison is 
of the prices fixed upon the articles exchanged, the barter 
becomes a double sale. 

The comparison, as shown in Chapter V, involves four de- 
sires, since each article is supposed to affect the desires of both 
parties ; and four utilities, as each of the articles has a separate 
utility for each of the parties to the trade. 

In sales, both parties estimate in money the value of the 
article offered, and, as the money is supposed to have the 
same value to both parties, the comparison becomes simpler 
and easier. But, in truth, each one compares his need of 
money, or of other things which money might buy, with his 
need of the article offered for sale, so that the four desires and 
utilities are always in question. 

Both parties to an exchange will be benefited if the utility 
which each one gains is larger to him than the utility which he 
parts with. All fair exchanges, inteUigently made, will give a 
balance of profit to each trader. Mistakes or misrepresenta- 
tions made by either party may destroy this just condition of 
mutual gains, and make the gain of the one the loss of the 
other; but the expectation of a real gain by the exchange is the 
motive which impels both parties to trade. 

It is frequently assumed that simple exchange can create 
no values, and that, therefore, every exchange, except of things 
precisely equal in worth, must entail a loss upon one of the 
parties. It is true that two horses, after being exchanged, 
are, to the general market, of precisely the same value which 
they had before the trade. Nothing has been added to the 
market value of either by the exchange. But if one was 

p. E.— 21. 



242 POLITICAL ECONOMY, 

desired because he was a racer, and the other because he was 
a good family nag, the trade may have given to each owner a 
larger amount of value than he let go. All values, it must be 
remembered, are, in the last analysis, individual and personal, 
because all desires' are so. The market value is but a general 
estimate of value based upon the supposed desires of all the 
persons who may want the article valued. It is but the esti- 
mated average of actual values. Thus, the market value of 
any horse is the estimated average of the prices which the per- 
sons desiring such a horse will give. It is well known that the 
horse will not be of precisely the same value to any two 
men; but the seller seeks to find what the average purchaser 
will be likely to give. 

Goods bought for sale and goods bought for use will have 
different estimates. A man purchasing for use, asks after the 
actual value to himself; but purchasing for sale, he asks after 
the market value or the price which the average buyer, in his 
market, will probably give hin>. The purchaser for use usually 
accepts market value as actual value. 

236. Hiring and rent. — Hiring differs from trade and 
barter in the fact that the two latter transfer ownership, while 
the former transfers only temporary use. 

Hiring includes both property and persons. Property is 
hired for its uses. Persons are hired for their labor and serv- 
ices. The former is usually called renting, letting, or leasing; 
the latter is called hiring or employing. 

The hiring of houses and lands is a temporary purchase of 
all property rights, excepting the right of sale, and of altera- 
tion. All the utilities of the property belong, for the time, to 
the lessee or person renting, and all the profits he can make 
out of the houses or lands, while holding them, are accounted 
as his own. The owner forgoes the use and profit, and re- 
ceives the rent in lieu thereof. The renter is saved the labor 
and expense of building, or from buying a house and land for 
himself, and pays his rent in place of the year's saving. 



TRADE. 243 

In the rent of houses, whether for dwelHng or for business, 
the renter pays his money in exchange for a vahiable use, a 
use which satisfies a want and saves a labor ; and which also, 
in general, contributes to a new value, in the labor force re- 
newed, or in the goods produced. The owner parts with 
a value in exchange, since he loses the use and also the value 
used up in the wear and deterioration of the house. 

The money paid for the rent of farm lands is exchanged for 
the use of these lands as an instrument of production. The 
owner receives the money rent in place of the products which 
the land would have brought him, less the expense of work- 
ing it. . 

The renting of land differs from that of houses in the fact 
that the land yields its use only on condition of a large ex- 
penditure of labor and capital. The profits are in part from 
the land; but in still larger part they are usually from the 
labor and capital expended in the cultivation. The rent is 
counted as coming out of the production, and in the so-called 
metayer system in France, and frequently in this country, is 
a stipulated share of the products. 

237, Domestic and foreign trade. — Trade has been com- 
monly divided into domestic and foreign. Domestic trade is 
between the citizens of the same country ; foreign trade takes 
place between citizens of different countries. The economic 
differences between the two are chiefly the following : 

I. In the goods exchanged. — Commonly, the goods imported 
from foreign lands differ in kind or quality from those pro- 
duced at home. Such goods do not come into direct competi- 
tion with home products. This remains true in such produc- 
tions as are peculiar to the foreign climate; but the progress of 
modern manufactures has brought a large list of common prod- 
ucts into direct competition between the great manufacturing 
nations. In this competition, the questions of differences in 
civilization, in governments, and in the cost of labor and capi- 
tal among the* two peoples are involved. The people which 



244 POLITICAL ECONOMY. 

can, at any given place, furnish the best and cheapest goods 
of a given variety, will gain the market for such goods. 

2. In the cost of transportation. — Domestic products are usu- 
ally exchanged with less transportation and risks than foreign 
goods, and, therefore, with less addition to the original cost 
of production. This difference is also disappearing with the 
improvement in steam, land and ocean carriage, and with 
the aid of the telegraph. 

3. In taxes and tariffs imposed. — Domestic goods pay the 
ordinary taxes of the country on capital, income, or products. 
Imported goods pay, if taxed at all,, the tariff or import duties 
imposed for revenue or for protection of home manufactures. 

4. In the means of exchange. — Domestic goods are exchanged 
chiefly by the aid of money, or its representatives; but there 
is no international money. Foreign trade is, therefore, a 
sort of barter. All goods imported must finally be paid 
for in goods exported. Even gold and silver, when paid 
to foreign countries, is sent as bullion, or merchandise, and 
not as money. Bills of exchange — drafts drawn on foreign 
debtors — serve, to some extent, as an international currency, 
and aid to effect exchanges; but these bills represent goods 
already sent. 

All of these differences are in themselves hinderances to 
foreign trade. Their weight may fall upon either nation, as 
circumstances determine, or may be divided between them. 

The advantages of foreign trade are many, and are both 
economic and social. It opens markets, stimulates production, 
diffuses improvements in the arts, enlarges the stores of knowl- 
edge, advances civilization, and promotes the harmony of 
peoples and the peace of the world. 

238. Wholesale and retail trade. — Trade is classified 
also as wholesale and retail; and each of these are, in prac- 
tice, subdivided according to the goods dealt in. Wholesale 
trade deals with goods in bulk, or in the original packages 
of the producers. It represents the principal or c*entral markets, 



TRADE. 245 

and collects goods from the producers, to distribute them 
to the retail dealers who represent the final markets. Its 
customers are the retail traders. 

Wholesale trade requires skill and intelligence of a high 
character. There is needed not only a knowledge of the 
widely scattered sources of production, and of the means and 
cost of such production, but also an equally wide knowledge 
of markets, and of the means of distribution. It requires, too, 
wide and difficult calculations of the probable suppHes and 
demands in near or remote markets. There are also needed, 
to successfully meet the many emergencies of trade, prompt- 
ness, decision, courage, and energy of the highest character. 
Many enter into this trade without all these qualifications, and 
sometimes succeed, for a time, by happy chances, but their 
final failures are as disastrous to the public as to themselves. 

A large command of capital is also required in the whole- 
sale trade. To purchase and hold goods in large quantities, 
to own or control means of transportation, and to provide the 
necessary store-houses, imply immense outlays. 

Retail trade sells goods in small quantities, and to the in- 
dividual consumers. Its mission is to bring goods of all kinds 
to the vicinity where they are wanted for consumption, and 
to hold them there to await the needs of customers. The 
source of its true profits has already been shown to be in the 
labor and capital necessarily expended by the trader and saved 
to the consumer. 

The skill required in retail trade is less than that demanded 
by the wholesale trader, but is still large as compared with 
miany employments. The skill needed to manage a small re- 
tail shop, confined to the sale of a few common articles, may, 
indeed, be speedily acquired by any one of the requisite edu- 
cation ; but it is evident that as the range and amount of 
goods to be kept increases, the problem rapidly grows difficult; 
and the frequent failures are sufficient proof of the ability and 
intelligence needed for success. 



246 POLITICAL ECONOMY. 

239. Is trade a tax?— It is held by many that the profit 
of the trader, or middle-man, is a tax, necessary, perhaps, 
but still a tax, upon the productive industries of the world. 
"His profit is a tax upon both (producer and consumer), 
which should be reduced to a minimum, for he adds nothing 
to the real wealth of society." — Thompson. 

An excess of traders or middlemen is, doubtless, an evil, 
as an excess of laborers in any other department would also 
be. The increase of traders does not increase trade unless 
buyers choose to increase their purchases. Nor does the in- 
crease of traders necessarily increase the profits charged upon 
goods. It tends, rather, by competition, to diminish profits. 

It is true that traders sometimes take advantage of their 
opportunities and charge larger profits than they are entitled 
to, but the absence of rival traders would not necessarily 
make them more honest or more just. The cure of this, as 
of so many other evils, must be sought in an increase of 
popular intelligence. It is one of the many cases in which 
people pay more for their ignorance than it would have cost 
to gain knowledge. The real utility of the trader's services, 
and their wealth-producing power have already been suffi- 
ciently proved. No community would long consent to do with- 
out such service; nor could the service be. done by any one 
without a costly expenditure of capital and labor. 

240. Balance of trade defined. — Connected with the 
subject of foreign trade, one meets the question of the "bal- 
ance of trade." By this phrase is meant the difference in 
amount or value, between the goods imported and those ex- 
ported. The balance of trade is said to be in our favor when 
we sell more than we buy ; and against us when we buy more 
than we sell. For some years our exports from this country 
have been much larger than our imports, and this has been 
thought so plain a proof of national prosperity that even the 
Presidents' messages have mentioned it with public congratu- 
lations. 



TRADE. ' 247 

The popular feeling in regard to the balance of trade is 
based upon two distinct notions: i. That selling is a source 
of income, and that buying marks expenditures; and, hence, 
that we are growing richer as a people when we sell more 
than we buy. 2. That when we send to foreign peoples more 
goods than they send to us, the balance in our favor must be 
paid in gold and silver, and thus increase our money and 
capital. President Hayes, in his message of 1879, said: "The 
increasing foreign demand for our manufactures and agricult- 
ural products has caused a large balance of trade in our 
favor, which has been paid in gold, from the ist of July last 
to November 15, to the amount of about $59,000,000." This 
statement is made in the midst of his congratulations on the 
national prosperity, of which he, in common with many others, 
thought this one of the proofs. This popular opinion is, per- 
haps, a survival of the old belief that w^ealth consists in money, 
a belief which led the English Parliament, in the times of the 
Tudors, to prohibit the exportation of gold from the country 
on pain of death. 

241. Is the balance of trade an advantage? — To 
judge rightly of this question, let it be reduced to a case of 
the balance of trade between individuals. All trade, foreign 
or domestic, is individual; for nations do not make exchanges. 
In fair exchanges, as we have seen, both parties are benefited ; 
and this is as true in trade across the seas as across the street. 
When foreign trade ceases to be profitable to our merchants, 
they will, doubtless, abandon it; and if it is profitable to them, 
it is difficult to see why it is not also profitable to the country 

But let us take the simplest case, of a single cargo. If an 
American trader sends to England a cargo of wheat, worth, 
in New York, $5,000, and sells it in Liverpool for cloth 
worth $6,000, which he brings home, the balance of trade is 
said to be against him, since he seems to have sold less than 
he has bought. But the cloth bought in Liverpool for $6,000 
may be w^orth, in New York, $7,000. So the balance of 



248 POLITICAL ECONOMY. 

trade, which seemed $1,000 against him, was in his favor to 
the amount of $2,000, less the cost of freight and insurance. 

Let us suppose that in place of taking cloth in full payment, 
he takes only $2,000 in cloth and the $4,000 is paid him in 
gold. The balance of trade is now pronounced to be in his 
favor, because he sells more than he buys; but it is evident 
that he makes less than before; and if the profit on the wheat 
and cloth is less than the expenses of the shipment, he really 
suffers loss. The gold itself is nothing but merchandise, as 
between different countries; and it is merchandise on which 
there is usually no profit. 

242. Profit and loss lie in use. — If, through failure in 
markets, the shipments turn out to be losses in either direction, 
the parties making the shipments are losers, whether the bal- 
ance of trade is in their favor or against them. If goods sent 
abroad are sold for less than cost, the more we export the 
worse for us; and if goods imported are sold or employed at 
a profit, the greater the importations the better. Even if the 
goods imported are merely luxuries, which are consumed with- 
out profit, the difficulty is not with the balance of trade, but 
with the useless consumption of luxuries. Had these luxuries 
been home productions, their consumption would have been 
equally the destruction of so much value; though in this case 
it is true the money or goods given in exchange would have 
remained in the country. 

It may be urged that the goods imported gave employment 
to foreign labor in place of home labor. This is true ; but it 
must be remembered that the goods exported gave to home 
labor employment which it would have lacked without the 
foreign market; for the exported goods, it is to be presumed, 
were in excess of the demands of the home market. And the 
objection Hes not alone against a balance of imports, but 
against all imports which might have been produced at home. 

By consequence, it lies also against all exports; for since 
in foreign trade all goods must be paid in goods or gold, 



TRADE. 249 

without imports there can be no exports. It may be pleasant 
to take our pay in gold, but it is certainly more economical 
to import goods on which there is a profit. The cloth which 
was $6,000 in Liverpool, but changed to $7,000 in New York, 
was a better bargain than the gold which remained worth 
only $6,000 after its costly transportation across the Atlantic. 
If it still be urged that a man who buys more than he sells 
is getting poorer, the reply must be, it depends upon the use 
he makes of his purchases. If he sells them to his neighbors 
at a profit, or uses them to improve his property, then it is 
not true that his purchases are making him poorer. The case 
supposed is this, that it is only his foreign purchases and sales 
that are in question, his sales to his neighbors not belonging 
to foreign trade. 



CHAPTER XXII. 



MONEY. 



243. Synoptical view: 



Natural 
functions. 



{•: 



Nature, origin, and history of money. 

As a commodity. 
As a measure of values. 
Functions J ' C 3. As a medium of exchange, 

of money. Legal — its power to pay debts — legal tender. 
It facilitates hoarding. 
It facilitates transportation. 

{Amount required. 
Effects of deficiency. 
Effects of redundancy. 



- Incidental. 



244. Peculiar character and power of money. — 

Money is the puzzle both of people and of economists. 
Economic science has no topic more difficult or important 
than this. Whether as a species of property, or as an instru- 
ment of trade, or as a potential factor in modern life, the 
roles played by money are as dazzling and bewildering as the 
splendid and coveted metals of which it is commonly made. 
Many volumes have been written, in almost every language, 
to give its history and to explain its functions, and still both- 
statesmanship and pubUc opinion seem alike divided and un- 
able to solve its practical problems. For a second time, this 
past summer (1881), an international congress of eminent pub- 
licitsts was convened to setde one of its questions, and ad- 
journed without reaching any conclusion. Kings and cabinets 

have juggled with it for their own profit, and demagogues 
(250) 



MONEY. 251 

have used it as a battle cry for electoral campaigns. It is 
the jumping-jack of values; the trick card of speculation; the 
king of the market ; and the most watched and feared of all 
the factors of trade and business. Its power is enormous be- 
yond calculation; its great holders, the "money kings," con- 
trol trade as monarchs rule kingdoms; and its great fluctuations 
shake the whole fabric of industry. Modern governments jeal- 
ously reserve to themselves the right to coin money, and the 
most difficult and most anxious legislation is that which is 
devoted to the guarding and controlling its issues and uses. 

245. Origin of money. — In its simplest notion, money is 
an instrument of exchange or trade. It is something to buy 
and sell with. As such, its invention was easy and natural. 
The first man who failed to find some one to give him the 
thing he wanted for the thing he wished to give in exchange, 
and who thereupon bethought himself to sell his commodity 
for some third thing with which he might buy the article he 
needed, invented money. The third something, which he used 
simply as a means of effecting his desired exchange, was to 
him money. 

Any commodity may be used to effect an exchange, and to 
that extent may become money. If I can not barter my corn 
for a coat, I may sell it for butter, and with the butter buy 
the coat. The butter, in this case, serves me as money. 
The more general the desire for any commodity, the better 
it will serve as a medium. Butter is better than corn, in this 
respect, because more people want butter than want corn. 

246. History of money. — In earlier ages, many different 
articles were used as money. Cattle, slaves, skins, shells, 
pieces of leather, feathers, strings of beads, grain, sugar, oil, 
nuts, tobacco, gold-dust, nails, postage stamps, and many 
other things, have all been used and counted as money. 

Gradually, as civilization advanced, and as exchanges in- 
creased in number and variety, the commodities most con- 
venient for the purpose were naturally selected and retained 



252 POLITICAL ECONOMY. 

for this use. These commodities were such as were found to 
fulfill most perfectly all the conditions required, to serve all 
the uses, and perform all the functions, of true money. 

Gold and silver won their place as money, in ancient times, 
from their brilliancy, their scarcity, their consequent high 
value, and their adaptability to coinage, and to general use as a 
portable medium of exchange. 

Money having been invented, and having speedily shown 
its immense power as the one commodity of universal desira- 
bility, its coinage was assumed among the prerogatives of sov- 
ereignty, and the legal quality became attached. To trace its 
whole history would be to review much of the economic his- 
tory of the world. The invention of coinage has been cred- 
ited to the Corinthians, the Lydians, and to the people of 
India. It is certain that coins were in use in the sixth cen- 
tury before Christ. The use of paper money dates from the 
fourteenth century in Europe, but it was employed in Asia, it 
is claimed, much earHer. 

247. The natural functions of money. — What is 
money? What does it do? To find the true nature and 
functions of money, let us examine «. single act of exchange. 
Since money, when used^ always takes the place of one of- 
the commodities in the act of exchange, it must, evidently, 
fill all the essential conditions filled by the commodity whose 
place it takes. 

1. In every act of barter or exchange, each of the articles 
offered in exchange must have value, must be an object of 
desire — a. real commodity. No one will, knowingly, give a 
valuable for a worthless thing. To fulfill this condition, money 
must also be a commodity, and have a recognized value. 

2. In barter, the values exchanged are counted as equal. 
Each one is measured against the other. Each measures the 
other. Money must also fulfill this condition — must equal in 
value the article for which it is given, and must, therefore, 
measure it. And as money is so commonly exchanged for 



MONEY. 253 

all kinds of goods, it comes naturally to serve as a common 
measure of values. Thus, the values of all articles are ex- 
pressed by the money for which these values would exchange. 

This incidental use of money has come to be one of its 
most important functions. It is the universal measure of values. 
In millions of daily exchanges and bargains in which no 
money is actually used, the prices of goods to be bought 
or sold are fixed at so many dollars, or marks, or francs, or 
pounds sterHng. The money value named, at once gives defi- 
niteness, in all minds, to the estimate of the values traded. 
Daily traffic would be paralyzed if this function of money 
should be destroyed or suspended. 

3. In exchanges it is also commonly required that each 
article shall have further exchangeability — that it may, if de- 
sired, be traded for other goods. This is the especial condi- 
tion required in any commodity to fit it to become a medium 
of exchange. The wider the exchangeability, the better it will 
serve as such a medium. Money, by reason of its universal 
exchangeability, is the universal medium of exchanges. This 
condition of exchangeabiUty is simply the extension of the 
first two conditions to successive acts of barter or trade. 
It is yalue and mensurability carried forward to successive 
exchanges. 

These three seem to be all the essential conditions of com- 
modities in exchange, and hence the essential natural func- 
tions of money may be stated as including these three : 

1. It is a commodity, — having a value of its own, 

2. It is a common measure of values. 

3. It has general exchangeability, and is, hence, a general 
medium of exchange. 

248. The legal function. — Legal tender. — To the three 
natural functions of money must be added the function given 
it by law, which authorizes the debtor to tender it in payment 
of Jiis debt, and compells the creditor to accept it. This is 
its so-called legal-tender quality. Without this legal quafity, 



254 POLITICAL ECONOMY. 

money might be accepted or refused like any other commod- 
ity. Its sole power as a medium of exchange would lie in 
its almost universal acceptability. But with this legal power 
behind it, it becomes something more than a commodity; it 
has the stamp and authority of the supreme government upon 
it, affirming its value, and commanding its use. It is evident 
that the act of coinage has a value in itself, and means, in 
practical life, something more than the mere ascertainment 
and certification of the market value of the metal contained 
in the coin. A conspicuous instance and proof of this is 
found in the subsidiary coins, whose money value is always 
higher than their metal or bullion value.. 

It is, however, a gross exaggeration of this legal power to 
suppose that nothing but the government fiat is necessary to 
give to any commodity the money power. Despotic govern- 
ments, have sometimes attempted to enforce the use of their 
depreciated money, under the penalty of death for its refusal, 
but their decrees have been found idle and vain. The neces- 
sity that money shall sometimes pass back into its primary 
condition as a simple commodity, limits the power of the gov- 
ernment stamp to give if perpetual currency, at more than its 
commodity value. 

249. Incidental functions. — Hoarding and transpor- 
tation. — Besides its natural and legal functions, money has 
two other common and valuable uses, derived from its form 
and monetary qualities, and which help to give it further 
desirability and currency: 

1. It serves to store up values, in a compact and nearly 
imperishable form, and thus facihtates hoarding or hiding such 
stores of value. 

So far as hoarding promotes prudence in expenditure and 
care in saving, it is an economic good ; but where the savings 
are placed in a savings bank, the same end is secured, and 
the money is not withdrawn from use. 

2. It allows and makes easy the transfer of property or 



MONEY, 255 

values to distant places. The owner of a farm on the Merri- 
mac, or Hudson, can not transport it to the banks of the 
Sacramento or Mississippi; but, by the aid of money, he can 
carry its full value with him, and possess himself of a farm 
in the locality desired. Much of property is of the immov- 
able sort; and if men could enjoy it only by remaining with 
it, the desire to save would be much restricted; but the aid 
of money permits the transfer with slight expense, not, indeed, 
of the identical articles, yet of their full value, to the most 
distant points. 

250. Money as a commodity. — Money as a commodity 
has two distinct values : the value of the metal of which it is 
made, and the value it has as an instrument of trade. The 
second depends, primarily, upon the first. Gold and silver, 
the common materials of money, are valuable as metals. In 
bulk, or bullion, they are supposed to have nearly the same 
worth as when manufactured into coin. It was their high 
values as precious metals which primarily gave them their 
currency as money. 

But money, as a manufactured commodity, has a value aris- 
ing from its special uses as money. ■ As such a commodity it 
must also obey the market laws of supply and demand. If 
in excess of the demand, its value will decline; .if deficient, 
its value will rise in the market. Bankers and brokers trade 
in the commodity of money, as merchants trade in other 
goods. They borrow or import it from places where it is 
cheap, and lend it in places where it is dearer; and this bor- 
rowing and lending is a species of purchase and sale. 

251, Variations in the value of money. — From its 
double value as metal and as coin, money* has two classes of 
variations in value, — the variations in the cost of the metal, 
and the variations in it as a manufactured instrument of ex- 
change. Paper money, representing as it does metallic money, 
will have the same variations. 

There is a popular feeling that we can not have too much 



256 POLITICAL ECONOMY. 

money; that the more money a man or a nation has, the 
greater the weakh of that man or nation. But no fact is 
more certain, in the commercial history of the world, than 
the depreciation of money in value, whenever it has been 
issued in excess of the public need. The history of the 
assignats issued in France during the French Revolution; of 
the continental currency of the times of our own revolution; 
the depreciated paper money of Austria, Italy, Turkey, Russia, 
and China, as well as in Mexico and the South American re- 
publics, all prove, beyond dispute, the certain depreciation 
of that kind of money when in excess; and this depreciation 
is not because it is paper, but because it is an excess of 
money. When the paper money is not made redeemable in 
coin, the depreciation is still more rapid, because the paper 
itself has no commodity value lying behind its money value. 
Metallic money must depreciate just as certainly when in ex- 
cess; but the depreciation of coin values can not fall below 
the value of the metals themselves; because, if not needed as 
money, coins are readily sold as bulhon, or exported as 
such. The immense increase of the precious metals during 
the sixteenth century, after the discovery of the American 
mines, diminished the purchasing power of metallic money by 
nearly four fifths. 

The fluctuations in the value of money are not confined to 
these extreme cases of excessive issue. They occur in money 
as** a commodity, and, because a commodity, as frequently, 
perhaps, as in other commodities, and from the same causes. 
The special use for which money is made is that of an 
instrument of trade. When there is more of this instrument 
than the trade requires, it is a surplus beyond demand, and 
must cheapen. When it is less than the trade demands, 
it is in deficiency, and its value rises. As trade itself is 
constantly varying in its amounts and demands, the require- 
ments for money must also change, and the daily money 
reports from the great money centers show this to be the case, 



MONEY. 257 

while the corresponding changes in the rates of interest show 
the rise or fall in the value of money. 

The fluctuations in the value of money are concealed from 
the popular view by the facts that the names and forms of 
the coins remain unchanged, and that the prices of all other 
commodities are given in money. The rise or fall in the 
worth of money is easily mistaken, therefore, for a rise or 
fall in the prices of goods. Thus, soon after the opening of 
the civil war, goods and labor were said to have risen in 
price; and after the close of the war, prices were said to be 
falHng; whereas, the rise in prices was a real fall in the value, 
or purchasing power, of money; and the subsequent fall in 
prices was a rise in the worth of money. 

This popular illusion must be kept in mind when we would 
estimate rightly the economic effects and phenomena of money. 
The fluctuations are inseparable from the function of money 
as a commodity; and, being concealed, the influence of these 
fluctuations is carried, almost without notice, into all the 
estimations of property, and all the transactions of trade. 

The variations of the value of money, arising from the in- 
crease or deficiency of the precious metals, are much slower 
in their progress and more permanent in their character. 

252. Money as a measure of values. — The measuring 
function of money rises naturally, as we have seen, from its 
use, or place, as one of the commodities in exchange. In 
strict truth, the measurement of the two commodities is mutual. 
The article purchased measures the money paid, as really as 
the money measures the article. The measurement is merely 
the determination of their equivalency. It is by finding how 
much a dollar will buy that we form our estimate of the worth 
of the. dollar. By common and general use, this value of the 
dollar becomes known to all traders, and henceforward it is 
used commonly as the most convenient means of expressing 
all values. 

Money is a conventional, not an absolute standard of 

p. E.— 22. 



258 POLITICAL ECONOMY. 

measurement. Its variations forbid its use as an absolute 
standard of value. In the measurements in daily traffic, its 
variations are of little consequence; but in the payment of 
fixed salaries and annuities, and in the liquidation of debts 
of long standing, it is often of great consequence, entailing 
serious losses upon some and giving undue advantages to 
others. This has led to the effort, described in a previous 
chapter, to find or create a permanent standard of values. 

The usefulness of money as a common measure of values 
is greatly increased by its divisibility. It would be exceed- 
ingly difficult to express the value of a coat in baskets or 
boots, or the worth of a hat in houses and lands ; but it is 
easy to give the price of the most trifling, and of the most 
valuable, commodities, in dollars and cents. It is this capacity 
of measuremicnt against the widest extremes of value which 
gives to money its greatest utility. By this, it serves the child 
to buy his penny toy, and the capitalist to purchase a railroad 
worth milhons. The day laborer counts in it his wages, and 
the government employs it to compute enormous national 
debts and incomes. This makes money the most useful labor- 
saving machine ever invented by human genius. Money, in 
this use as an instrument of measurement, is called, frequently, 
"Money of account." 

It is the measuring function of money which renders its 
concealed fluctuations of value so harmful and sometimes dis- 
astrous. It is as if some one should secretly, in a night, 
shorten or lengthen by an inch all the carpenters' rules and 
other measures of length in the country. The next day every 
one would find his property changed in its apparent dimen- 
sions, and every unfulfilled contract would be changed in its 
requirements. 

253. The medium of exchange. — The function of 
money most known and regarded among men, and often 
among economists, is that of a medium of exchange. Popu- 
larly, this is believed to be its only essential function; and 



MONEY. 259 

hence the conclusion that any thing which can be made to 
fulfill, for a" time, this function, is good enough money. 

Its function as a medium of exchange is fulfilled whenever 
it is offered and received in payment for goods or labor. The 
exchange is completed when the money is exchanged again 
for other goods. Men sell their products for money in order 
that with the money they may buy in turn the products of 
other men. The full act of exchange is thus divided, as an- 
other expresses it, into halves, a purchase and a sale; and the 
exchange is made easier, because that only one of the com- 
modities is to be considered and passed upon at a time. If 
the farmer wishes to trade his wheat for cloth, he is obfiged 
to consider carefully the value of each; but if he sells his 
wheat for money, and afterwards purchases the cloth with 
money, he feels that each transaction is simplified, for, know- 
ing in general the value of the money^^ he is forced to con- 
sider first only the price of the wheat, and afterwards the 
price of the cloth. 

The great utility and convenience of money as an instru- 
ment of exchange are too obvious and too well known to 
need demonstration. A single illustration is sufficient. To 
trade his load of wheat for all the various articles he wishes 
to get in market, would cost the farmer the labor of days, in 
finding the persons wishing to make such exchanges as he 
desires, and in dividing out his wheat to each in due measure; 
but selling the whole load for money, and buying at once the 
articles he needs, his task is reduced to the minimum of time 
and labor. 

254. The measure more important than the me- 
dium. — In general, no use is popularly known for money 
except that of buying and selling, and as any money which 
will pass currently for the time fulfills this use, it is no wonder 
that little care is felt for the character of money in use so 
long as it passes. Brass is as good money as silver, and 
paper is equal to gold, as long as people will take the one as 



26o POLITICAL ECONOMY. 

readily as the other. So says the crowd. But, as we have 
shown, to serve as a means of exchange is not the only 
function of money. Its very power to effect exchanges de- 
pends upon its character as a commodity and its capacity for 
measurement. These never leave it, and it is through these 
that it enters into the commercial system as blood in the body. 

But a small part of the actual exchanges of goods and 
property is made with money. MilHons are bought and sold 
on credit. It is said that ninety-five per cent of the daily 
exchanges of New York City are effected by other means than 
money. But not one is effected without the measuring power 
of money. Every yard of cloth in store, every day's labor, 
every house and acre of land, every ship that sails the seas, 
every cargo that comes or goes, the great aggregations of 
wealth, the gigantic shadow^s of debt, all are measured by 
and in the units of money. And as these change with the 
commodity value of money, the entire accumulations of the 
property of the world feel the effects. It is not the few 
milHons of money that pass from hand to hand in the course 
of daily traffic, but the mightier millions which He in banks 
and in government treasuries, which are to be watched and 
taken into account by the economist and statesman. It is 
these gigantic reserves which react upon the money market, 
and through this upon all the markets of the world. What 
the dollar in the market will buy is determined by the millions 
of dollars which do not appear in market, but lie in the strong 
vaults ready to meet the final settlements of trade. 

The most essential step in making an exchange is the fixing 
the price, and this must be done by the aid of the measuring 
power of money — not money actually present, but "money 
of account" — the established unit and value of money. The 
price fixed and agreed to, the remainder of the transaction is 
very simple, and is as easily done without money as with it, 
in most cases. It is but to transfer the goods to the purchaser, 
and to take a note, draft, or promise, or a paper dollar, 



MONEY. 261 

which is also only a promise, that some time, when desired, 
or as agreed, the seller shall have value in return. 

255. Amount of money required. — The quantity of 
money required by any country will depend upon three chief 
conditions : 

1. The advancement in civilization. — Savage peoples are poor 
and . have few exchanges. They require, consequently, little 
or no money. As civilization advances, the differentiation 
of employments goes on, and exchanges become steadily more 
necessary and more numerous. Up to a certain point, the 
demand for money constantly increases. After this point is 
reached, the money begins to become burdensome by its 
amount, and the increased intelligence finds substitutes for it 
in the larger transactions, while the increase of public moral- 
ity favors credit exchanges which are made without the use 
of money, except on final settlement. 

2. General wealth. — The larger the wealth of any people, 
and the more widely this wealth is diffused among the people, 
the greater the demand for money to effect the daily ex- 
changes. But if the wealth is confined to the higher classes, 
and the peasantry are poor and ignorant, the demand for 
money will be less. The largest actual use of money in daily 
life is found in the payment of wages, and in the purchase, 
at retail, of daily supplies. Both of these increase with the 
diffusion of wealth, and diminish with the poverty of the 
masses. 

3. Intelligence and morals affect the money demand for 
another reason. Ignorance and low morals create common 
distrust, which not only compels cash payments, but also leads 
to hoarding. Intelligence and good morals increase credit, 
and favor institutions of credit. Hoarded money goes out 
of circulation and use; but money deposited in a savings bank 
still remains in circulation, the bank loaning it on interest. 
An ignorant population must commonly work for small wages; 
a vicious population will usually prefer idleness to toil. 



262 



POLITICAL ECONOMY. 



256. Money circulation of principal countries. — The 

following tabular statement is taken from the report of the 
Director of the Mint, for 1881 : 



COUNTRIES. 



United States 

Great Britain 

Canada 

Australia 

India 

Germany 

France , 

Belgium 

Switzerland 

Greece 

Italy 

Austria 

Sweden. 

Norway 

Denmark. 

Netherlands 

Russia. 

Spain 

Portugal 

Turkey 

Mexico 

Colombia 

Peru 

Brazil 

Venezuela 

Central America 

Argentine Republic 

Cuba 

Japan 

Algiers 

Hayti 

Cape of Good Hope 

Total ; 



POFULATION. 



876 



LATEST 
CENStTS OR 
ESTIMATE. 



50,155,783 
35,246,833 
"•'4,075,000 

2,749'852 

191,096,633 

45,194,172 

36,905,788 

5,476,668 

2,846,102 

1,679,775 

''27,769,47s 

37,741,413 

4,568,901 

1,806,900 

1,980,675 

3,866,456 

86,952,347 

16,625,869 

4,160,000 

■'2 1 ,000,000 

9,343,470 

2,951,3" 

2,703,070 

10,108,291 

2,080,000 

=■=2,600,000 

=•'■2,000,000 

1,394,516 

33,623,319 

2,867,626 

"■■=572,000 

720,984 



$780,506,128 

207,001,444 

41,562,711 

23,606,739 

55,874,880 

276,897,658 

511,328,021 

63,434,827 

i6,594,coo 

12,890,000 

323,975,402 

295,611,587 

21,657,372 

10,375,265 

19,028,000 

83,836,901 

126,237,000 

53,867,288 

5,023,360 

21,871,289 

1,500,000 

1,895,343 

13,098,820 

91,000,000 

250,900 

163,347 
373,470,000 

48,943,457 
147,288,681 
11,194,000 



4,129,230 



3,644,113,650 



TOTAL GOLD 
AND SILVER. 



$749,042,484 

694,595,544 

10,646,000 

60,440,708 

1,015,000,000 

607,792,577 

1,478,062,000 

107,000,000 

34,700,000 

7,500,000 

57,900,000 

90,400,000 

11,681,616 

10,913,324 

14,179,000 

85,793,273 

119,209,784 

200,000,000 

60,000,000 

15,589,828 

50,00^,000 

4,500,000 

1,882,018 



11,000,000 
2,692,300 
6,000,000 

50,000,000 
[50,514,016 

16,306,748 
5,000,000 

32,440,726 



5,760,181,946 



TOTAL PAPEl 
AND SPECIE. 



1,529,548,612 

901,596,988 

51,608,711 

84,047,447 

1,070,874,880 

884,690,235 

1,989,390,021 

170,434,827 

51,294,000 

20,390,000 

381,875,402 

386,011,587 

33,338,988 

21,288,589 

33,207,000 

169,630,174 

245,446,784 

253,867,288 

65,023,360 

37,461,117 

51,500,000 

6,395,343 

14,980,838 

^1,000,000 

11,250,900 

2,855,647 

379,470,000 

98,943,457 

297,802,697 

27,500,748 

5,000,000 

36,569,956 



9,404,295,596 



* Estimated. 



rv 



MONEY. 263 

Most of these figures will be sufficiently explained by the 
three conditions described as affecting the amount of money 
required. 

The countries with a small amount of money per capita 
will usually be found to have large masses of the population 
in an ignorant or barbarous state, England claims larger 
wealth and more business than France, but has only a little 
more than half the per capita of money. M. Chevalier attrib- 
utes the difference to the advantage which England derives 
from its institutions of credit, its banks and clearing houses, 
which enable it to accomplish the same amount of exchanges 
with a less quantity of money. It is, doubtless, due also to 
the disposition so common among the French people to hoard 
money, derived, perhaps, from circumstances in their former 
history, and continuing by force of habit. 

257. Redundancy and deficiency. — The effects of a 
redundance and a deficiency of money demand careful con- 
sideration. As we have seen, money, like any other com- 
modity, is liable to the operation of the laws of supply and 
demand. Having specific functions and uses, whenever it ex- 
ceeds the amount required for those uses, it is in excess; and 
whenever the amount falls short of supplying those uses, it is 
in deficiency. 

The amount of money needed varies with the course of 
trade and business. It is larger at some seasons of the year 
than at others. For example, there is a large demand for 
money when the crops are being .marketed; also when the 
taxes of the year are being collected. Great public move- 
ments and enterprises, in which large amounts of materials are 
to be purchased and great numbers of laborers are to be 
employed, also create large demands for currency. 

The excess or deficiency of money can only be known by 
its effects. An excess lowers interest and raises the prices of 
commodities; a deficiency increases interest and lowers prices. 
The bank reserves, as they are called, the amounts of money 



264 POLITICAL ECONOMY. 

held by the banks at the great commercial centers, are now 
watched, as indicating the dearth or plethora of money. Bank 
interest rises and falls with the diminution and increase of 
the reserves. These fluctuations are usually temporary, de- 
pending on the movements of business; but there are cases 
in which the whole volume of the money of the country rises, 
for a protracted period, above the general need, or falls below 
the demand. In such cases, a readjustment of general prices 
and values will occur, and so the excess or deficiency will 
disappear. 

258. Effects of too much money. — A general and pro- 
tracted redundancy of money tends : 

1. To stimulate business. Increasing the prices of commod- 
ities and of labor, and raising the apparent value of property, 
it produces a spirit of speculation, and thousands rush into, 
or enlarge, their business. The increasing prices are mistaken 
for an increasing demand, and men count upon a career of 
prosperity. In the end, if continued, the effect would be 
simply the employment of more money to do the same amount 
of business. Each man would get more and give more in 
trade. 

2. It places the country at a disadvantage in relation to 
other countries; for the high cost of its commodities would 
discourage or forbid their export, and the redundancy of 
money, even if it is in gold, can not be exported except at 
a loss, since it must go as bullion and not as coin. 

259. Too little moneyc — A protracted deficiency of money 
tends : 

1. To hinder exchanges and diminish, to some extent, the 
circulation of goods. 

2. To increase the rate of interest and to discourage busi- 
ness. The fall of prices and of wages are commonly taken 
as evidences of general prostration and poverty, and men 
hesitate to go into business or to increase their risks. The 
final result must be to fix all prices on a lower scale. Men 



MONEY. . 265 

get less and give less money in trade, and business accommo- 
dates itself to the new values of money. 

3. The country gains in its relations to foreign countries 
where a similar result has not been reached. Its exports are 
at a larger profit, and gold, if not goods, may be imported 
at an advantage. 

Another and serious effect of a deficiency of money, is 
the hardship imposed upon the debtor class. This class is 
always a large one, and especially in times of financial pros- 
perity, when public confidence enlarges the amount of private 
credit. As a deficiency of money raises its relative value, the 
debtor finds his debt increased, while the property for which 
he incurred the debt shrinks in price. The opposite line of 
effects follows a redundancy of money, which entails a hard- 
ship upon the creditor class. During the war, mortgages upon 
western farms, to an immense amount, were paid off with 
paper money worth no more than one third to one half the 
money loaned. On the other hand, debts contracted and 
mortgages given during the later years of the war, or in the 
years which immediately followed the peace, while the great 
volume of paper money was still afloat, had to be paid at a 
later date in money worth two or three times that which was 
borrowed. 



p. E. 



—23. 



CHAPTER XXIII 



MONEY — CONTINUED. 



260. Kinds of money. — Metallic. — Modern money is of 
two chief classes: i. Metallic money, called specie; 2. Paper 
money, sometimes called credit money. Each of these classes 
has several varieties. 

All the civilized peoples now concur in the choice of the 
two precious metals, gold and silver, as the fittest materials 
for money. Inferior coins and tokens are made of copper, 
nickel, and alloys. 

Gold and silver, which have been in use as money from 
very early times, are peculiarly suited to be the money of the 
world: I. They are beautiful and easily distinguished in color. 
2. They are sufficiently hard and durable to receive and re- 
tain the impress of the mint in coinage. 3. They are so val- 
uable that small and portable quantities contain the requisite 
amount of value. 4. They are nearly sufficient in amount to 
supply the money needs of the world. 5. They have an in- 
dependent value for other important uses in the arts to sus- 
tain and regulate their use as money. 6. They are suscepti- 
ble of being divided into equal parts sufficiently minute to 
measure nearly all the current values of the market. 7. They 
are so nearly indestructible that they may be hoarded without 
danger of loss. 8. Though liable to fluctuations of value, 
from the rates of production, they fluctuate so Httle and so 
slowly that, within periods of considerable length, they may 

be considered as fixed in value. 9. It is another advantage 
{266) 



MONEY. 267 

possessed by these metals, that they are so related to each 
other in value, that the one furnishes convenient coins of 
small value, and the other, coins of large value. Few of 
these advantages are found in other metals; and no other 
metal possesses them all. Platinum has been proposed and 
coined by Russia, but the supply is not sufficient for a gen- 
eral use; and if new discoveries should overcome this objec- 
tion, it has such a limited use in the arts that its value could 
not be kept at a high figure when greatly increased in amount. 

With the addition of copper and nickel for the coins of 
small value, the metallic money system may be regarded as 
complete. So far as a specie currency is concerned, these 
four metals leave little to be desired. 

The history of the precious metals, and of their use as 
money, — of their fluctuations of value, and of their relative 
changes, — is full of interest and instruction, and recent inves- 
tigations afford abundant material for such history; but it 
would unnecessarily swell our volume. The articles on gold, 
silver, money, mint, coin, and coinage, in the cyclopaedias, or 
any of the numerous books upon money which have recently 
appeared, will give the student or reader a fuller statement 
than would be possible here. 

261. Problems of coinage. — The question of the standard 
of coinage has assumed, of late, a new interest and impor- 
tance. The demonetization of silver by the German Empire, 
the remonetization of this metal in the United States, the vast 
discoveries of silver and gold in Western America, Australia, 
and Russia, and, finally, the two unsuccessful international 
conferences, held in 1878 and 1881, to secure the adoption 
of a common standard by the leading commercial countries 
of the world, — all these have given to the subject an interest 
which is scarcely exceeded, at the present time, by any other 
in the range of Political Economy. 

The practical problems of coinage are the following : 

I. The choice of the metal or metals for the legal money, — 



268 POLITICAL ECONOMY. 

money to be coined by the government and made legal tender, 
for the payment of all debts. 

2. The determination of the money unit; as the dollar, the 
franc, or the pound sterling; and also the multiples and frac- 
tions of this money unit to be represented by different coins. 

3. The fixing of the amount of pure metal and alloy which 
shall make the unit coin and the other pieces. 

4. The choice of the form, design, and inscriptions for each 
piece. 

5. Whenever two or more metals are to be used as money, 
the determination and establishment of the ratio of value 
between them. 

262. Single and double standard, — The chief question 
now in debate between states and among statesmen is whether 
gold or silver, or both, shall be made legal tender. Countries 
using both gold and silver as legal currency are said to have 
a double standard. Those using only a single metal, either 
silver or gold, for their legal currency, have a single standard. 
The single silver standard prevails in Australia, in India, 
China, and other countries in Asia. The gold standard is in 
use in Great Britain, Germany, the Scandinavian Kingdoms, 
and Portugal. The double standard, gold and silver, prevails 
in the states of the so-called Latin union, including France, 
Belgium, Italy, and Switzerland. It is also in use in the 
United States, in Spain, Greece, Netherlands, Mexico, Japan, 
and Russia. The countries having the gold standard still use 
silver for subsidiary coins, — or biUon, as the French call all 
coins which are employed to make change, but are not a 
legal tender, except for very small amounts. 

In 1873, the United States demonetized silver, taking away 
from silver coins their legal tender quahty. Not long after- 
wards the agitation began for its remonetization, and after a 
long and somewhat heated conl!roversy, in Congress and by 
the press of the country, silver was again made legal tender, 
and its extensive coinage was commanded by law. Since this 



MONEY. 269 

remonetization, the opinion has been growing stronger in this 
country, that, the double standard is founded in reason, and 
ought to prevail throughout the world. 

263. Battle of the standards. — "The battle of the stand- 
ards," as Prof. Jevons calls it, began in earnest only after that 
the gold discoveries in California, in 1849, ^i^d in Australia, 
in 1 85 1, threatened, by their extraordinary richness, to create 
a monetary revolution. Apprehending that gold would sink 
enormously in value, Germany, in 185 1, hastened to demon- 
etize gold and establish the silver standard. Belgium and 
Holland also joined the silver states. The annual production 
of gold, according to Gen. Walker, rose from $30,000,000, 
in 1846, to $150,000,000 in 1852, while the annual yield of 
silver increased, in the same time, from $32,500,000 to 
$42,500,000. But the panic proved needless. The fall in 
gold was lightened by the larger coinage of it in the double 
standard states, and by the fact of the two metals being tied 
together in these states. According to Prof. Jevons, the price 
of silver was raised only from 59}^d. to 62 ^d. in London, 
and the permanent depreciation of gold was not more than 
one and a half per cent. 

In 1859, the rich Comstock lode was discovered in the 
Sierras, and in 1861 the silver mines of Nevada began to 
pour their treasure upon the markets of the world. Slowly 
the tables began to turn; gold began to rise from its depressed 
condition, and silver to fall. By 1867, the two metals stood 
at par again; but silver continued to fall, and now came a 
silver panic. Germany, in 187 1, demonetized silver and es- 
tablished the gold standard, offering a large amount of silver 
for sale, and entering the market for gold. Her example was 
followed by the Scandinavian states, Denmark, Sweden, and 
Norway. And India, the hitherto insatiable market for En- 
gland's silver, having fallen off in its demand, the price of 
silver went down to 47d., or less. In 1879, it had risen 
again to 52^^^. According to General Walker, the mean 



270 POLITICAL ECONOMY. 

annual rate of exchange, by weight, of silver to gold, was, in 
1867, 15.57 for i; in 1871 it was 15.58: i; in. 1873 it was 
15.92:1; in 1874' it was 16.17:1; in 1875 it was 16.58:1; 
and in July, 1876, it fell to 20.17 '• i- 

The silver product of the United States rose from $2,000,000, 
in 1861, to $38,000,000, in 1878. In 1854, the annual silver 
product of the world was estimated at $47,442,000. In 1878, 
it was reported at $87,351,491. The total production of the 
precious metals throughout the world, in 1880, as given in 
the annual report of Hon. Horatio C. ^urchard, director of 
United States Mint, was as follows : 

Gold, weight, 160,984 kilograms; value, ^106,989,846. 
Silver, M^eight, 2,105,966 kilograms; value, 87,543,072. 

England established the gold standard in t8i6, and has 
adhered to it steadily since. Her statesmen and economists, 
with some distinguished exceptions, are monometallists. The 
United States had the double standard till 1873, ^^<i reestab- 
hshed it in 1878. France and the other countries of the 
Latin union, established in 1865, hold to the double standard, 
and their most eminent statesmen and economists are bimetal- 
lists. The experience of the world is as yet too limited to 
allow a final settlement of the controversy by an appeal to 
unanswerable facts; but the present aspect of the field may be 
usefully stated. 

I. All agree that, in any event, silver must continue in use 
for coins of smaller value than can be coined conveniently 
from gold. Even the gold dollar has been found too small 
for safe use. And as the larger part of the currency, in daily 
use among the people, is of these lower denominations, silver 
must still supply the working coin of the world, to a very 
large extent. The silver coin in circulation in Great Britain, 
in 1881, was $92,263,973, to $602,331,571 in gold coins. 
Much of this gold was locked up in the banks, to serve as 
the basis of the paper money in circulation to the amount 



MONEY. 271 

of '$207,001,444. The specie circulation in France was esti- 
mated, in 1 88 1, to be: 

Gold, ^874,876,000. • 

Silver, legal tender, 545,286,000. 
Silver, limited tender^ 57,900,000. 

2. It is claimed by the bimetallists, and partly admitted by 
the others, that gold can not be had in sufficient quantities to 
supply the money need of the world ; but it is urged, on the 
other hand, that the Asiatic peoples will continue to use silver 
alone. Japan, however, has adopted the double standard, and 
has already a large gold coinage, amounting, in 1874, to 
$99,852,138. And if all Europe and the United States should 
adopt the gold standard, a gold famine must result, which 
would prove, for a time, ruinous to business interests. The 
total circulation of thirty-one leading countries of the world, 
embracing Japan and India, as given in the report of the 
director of the mint for 1881, was as follows: 

Gold coins, , . . , ^3,221,223,971. 
Silver, legal tender, . 2,115,169,997. 
Silver, limited tender, 423,787,978. 



Total specie circulation, ^5,760,181,946. 

The paper money in circulation, at the same time, was 
$3,644,113,650. The specie held in reserve to support this 
paper circulation was $1,259,808,053. 

3. The demonetization of either metal by any great com- 
mercial people, and much more, if general, would depreciate 
that metal by taking from it a large part of its uses, and 
would tend, to the same extent, to raise the value of the one 
left to bear alone the money work of the world. The demon- 
etization of silver by Germany, in 187 1, is claimed to have 
been the chief cause of the depreciation of silver which fol- 
lowed; though its remonetization by the United States has as 
yet done but little to restore this metal to its old relative value. 



272 POLITICAL ECONOMY. 

This is partly explained by the continued sale of German 
silver, and by the temporary discontinuance of the silver coin- 
age of the Latin union. 

4. It is admitted that both gold and silver fluctuate in 
value, and at different rates at different times. It is claimed 
that the mean of fluctuation between them is less than the 
fluctuation of either of these metals alone. When tied to- 
gether by law as parts of a common currency system, each 
one acts as a check upon the fluctuation of the other. If 
gold becomes dearer, silver is called more into use, and the 
rise of gold is checked; and if silver rises beyond its proper 
valuation, gold comes back into circulation, and silver is held 
in check. This compensatory action, as it is called by M. 
Wolowski, has been well illustrated by the action of the 
French system, to which, according to Prof. Hansen, of the 
Berlin University, ''Europe, or, rather, the whole civilized 
world, is indebted for its escape from the perturbations in 
the relative price of gold and silver, threatened by the enor- 
mous arrivals from Australia and California." — Report of 
Silver Commission. 

5. It is a known law that the poorer money will always 
drive out the better, from circulation, as was announced three 
centuries ago by Sir Thomas Gresham. It is affirmed, there- 
fore, that the metal which is for the time depreciated, will 
displace the other, and thus bimetalism will prove practically 
to be only monometalism, with the poorer metal always in 
use. To this it may be rephed that if true, it is of much 
less consequence than the larger fluctuations which must result 
from the use of a single standard. The chief point in the 
discussion is how to save business and property from the 
effects of the monetary fluctuations. The later experiences 
of the United States have served to shake somewhat the con- 
clusions that only the poorer metal will remain in use. 
Although silver remained in a depreciated condition, large 
importations of foreign gold came into the country during the 



MONEY. 273 

years 1879, 1880, and 1881, under the necessities of trade. 
It is true that only silver is found in common circulation; but 
it may be said that for the common purposes of business 
silver is most convenient. The gold has remained in the 
banks and in the government treasury as a basis of the paper 
circulation. 

6. It is a common objection, urged by the monometalists 
against the use of a double standard, that the ratio between 
the values of the two metals changes from time to time, and 
this demands a revision and reestablishment of the legal ratio. 
Yes; but this change goes on so slowly through the course 
of years as to affect but slightly the monetary values of the 
coins, supported as they are by the legal tender function 
already described. The chief use of gold and silver is as 
money, and they are not, therefore, likely to be greatly 
affected by any variability of demand for them in the arts. 
The annual consumption of the precious metals throughout the 
world, in ornamentation, manufactures, and' the arts, was esti- 
mated, for 1880, to be $75,000,000 of gold and $35,000,000 
of silver. This estimate is much higher than any estimate 
made heretofore. The production for the year 1881, in the 
United States, was, of gold, $36,500,000, and of silver, 
$42,100,000, coining value, or about $37,000,000 bullion 
value. The total consumption, in the arts, was estimated at 
$11,000,000 in gold, and $6,000,000 in silver. 

264. Paper money. — Paper money, as it is popularly 
called, consists of a printed promise to pay to the holder the 
sum of money named in the promise. This promise, issued 
in modern times by the government or by a bank authorized 
by government, is treated as representing the money which is 
named in it, and which is obtainable, on demand, in exchange 
for the paper itself. Thus representing a sum of real money, it 
is readily taken in place of money, and serves all the purposes 
of money in effecting exchanges. It is received and paid out 
as readily as coins; and the unreflecting, who think only of 



274 



POLITICAL ECONOMY. 



this common use of money, are led to believe that it is as 
real money as the gold and silver coins whose functions it 
seems to fulfill. 

Paper money has two origins, and is, therefore, of two 
kinds, — C7'edit money and representative jnoney ; though both may 
be called representative in the sense that they have no value 
of their own, but in all cases represent other values, for which 
they may be exchanged. 

265. Credit money. — Credit money consists of bills issued 
by government or by banks, and promising to pay on demand 
the sums of money named in the bills. Such bills simply 
pledge the credit of the party issuing them to their redemp- 
tion. They differ from an ordinary note of hand, given by 
an individual or by a business firm, in two important respects: 
I. In having a convenient form for circulation, being finely 
engraven, with devices to guard against counterfeiting, and 
printed on fine, strong paper fitted to endure much handfing 
and wear; 2. In being issued under special laws giving author- 
ity to issue such bills to be used as money, and providing 
against over issue and loss to the holder. 

With these two important exceptions, these bills are Hke 
any other notes of hand, or credit paper, payable on demand, 
and resting on the solvency and trustworthiness of the parties 
making them. Private notes, checks, and bills may perform 
the functions of money in the same way, but the bills of 
banks and of government perform them more widely and 
safely from the above-named facts of their conveniences of 
form and their legal guaranty. They are also issued in smaller 
and more convenient denominations. 

266. Representative money. — Representative money, 
strictly so called, consists of tokens or certificates of deposit 
issued by the government or some corporation, which receives 
gold or silver from any depositor, arid gives him in exchange 
a certificate, or certificates, for the amount. These certificates 
represent money actually on deposit, and to be had by the 



MONEY. 275 

holder of the certificate on demand. The certificates pass 
firom hand to hand in the same manner as the coins would 
which they represent, and thus serve as money. 

The bankers of Amsterdam and Hamburg are said to have 
given these tokens or certificates of deposit in early times; 
and, in London, the merchants were accustomed to deposit 
their gold and silver with the goldsmiths for safe keeping, 
and their receipts circulated as currency under the name of 
' ' goldsmiths' notes. " 

In the paper money now in use in this country, both 
classes of paper are found. The greenbacks and national 
bank-notes are, properly, credit money, being simply prom- 
ises to pay; the silver certificates are representative money. 
The main economic difference between the two classes of 
paper is that the representative money can never exceed, in 
amount, the coin on deposit, while the credit money may be 
issued to any extent the law will permit, 

267. Advantages of paper money, — Whatever may have 
been its earlier history, paper money has, in these times, 
been found to have advantages which will certainly insure its 
continued use. Among these advantages, the following are 
some of the chief: 

I. Its easier counting and portability. MetalHc money is, 
necessarily, coined in pieces of small value. The most valu- 
able gold coin, the double eagle, is worth only twenty dollars, 
and most coins in use are much lower in value. To count in 
coins the large sums now common in trade would occupy 
too much time, and the transportation of these sums, when 
counted, would be still more difficult and hazardous. Bank 
bills may be made of any denomination, and they commonly 
include bills of $50, $100, $500, and $1,000. These may be 
as quickly counted as single dollars, and it is no more diffi- 
cult to carry $50,000 than to carry $50. The money required 
for a journey would be burdensome in coin, but in paper it 
is both easily carried and readily concealed. 



276 POLITICAL ECONOMY. 

2. Economy in the wear of coins. The loss of the precious 
metals, by the abrasion or ordinary wear of coins, and by the 
clipping, sweating, and other fraudulent mutilations, is saved 
by depositing the coins and employing paper substitutes or 
representatives. Careful estimates show that the average life- 
time of the English gold sovereign, before it is too much worn 
to pass current, is only about fifteen years. Smaller gold coins 
and the silver change in daily use suffer much more. These 
losses, as well as those arising from the total loss of coins, 
are avoided by the use of paper, except the cost of the 
renewal of paper notes. 

3. Paper money enables a country to multiply its currency 
without largely increasing its supply of the precious metals. 
This applies only to credit money; for, as we have seen, true 
representative paper, or coin certificates, can be multipHed 
properly only as the coin itself is multipHed. Credit money, 
to be safe from depreciation, must be convertible into coin by 
exchange at the will of the holder; and, to secure this con- 
vertibility, the government or banks issuing the paper must 
keep on hand the coin necessary to redeem the bills as pre- 
sented. But it has been ascertained that never, while the 
public confidence remains unshaken, will all the bills be pre- 
sented at once for redemption. And those redeemed to-day 
may, in the course of business, be issued again to-morrow. 
Experience teaches that a paper circulation is safe in ordinary 
times that has a reserve of one third of its value in coin kept 
on deposit for its redemption; that is, with a million dollars 
of coin in bank, it is safe to issue for circulation three millions 
of dollars in paper. It is understood, of course, that in addi- 
tion to the coin reserve, the banks hold other property of 
various kinds, which may be used to redeem its paper issues 
in case of necessity. The national banks are required to 
deposit with the United States Treasuer government bonds 
to secure the redemption of their bills. November i, 1881, 
the government paper, including treasury notes and silver 



MONEY. 277 

certificates, in circulation was $420,151,878, while its metallic 
reserve, at that time, was $268,975,470. The national bank 
notes in circulation was $360,344,250, and the specie reserve, 
in the banks, $107,450,756. Thus, the country, possessing 
only $376,426,226 in specie reserves, had for use, in place 
of this specie, $780,506,128. 

4. It is another advantage of paper money, that its amount 
can be rapidly increased when the wants of trade demand it. 
Metallic money .can only be increased slowly. The metal 
must be obtained and then coined; but the volume of paper 
can be multiplied by a few movements of the printing-press 
and a few strokes of the pen. 

These advantages of paper are not gained without some 
perils, which it is important to consider. 

268. Dangers of paper money. — i. The first and chief 
danger of paper money is that of over issue. It has been 
seen that a redundancy of money leads to a depreciation in 
its value, or a loss in its purchasing power. In metallic 
money a surplus is not easily reached, and is quickly remedied 
by its ready flow to markets where it is more needed, and 
will bring a better price. Gold and silver are in demand in 
all lands, but paper money has no currency outside the 
country in which it is issued. This danger can only be 
avoided by making the paper always convertible into gold 
and silver, at the will of the holder, so that when depreci- 
ated it may be exchanged for specie, and the specie, if in 
excess, may be exported. But, unfortunately, when the crisis 
comes, the government is too frequently asked to suspend 
specie payments, or, in other words, to allow a temporary 
violation of the promise to pay money for the paper^ and 
then the specie silently steals away to foreign markets, and 
the people are left with their irredeemable and depreciated 
paper, to do with as best they can. 

2. Prudent governments, guided by the common sense of 
the world, have not often been willing to give the legal tender 



278 POLITICAL ECONOMY. 

power to paper money, and so the people have been left free 
to receive it or not, as suited them; but in times of war, or 
great public distress, the temptation to get cheap money has 
been too strong, and the government, pressed for funds, has 
used its authority to give legal force to its paper. This might 
not prove harmful if it were not accompanied or followed by 
over issue; but the very object of giving to paper the legal 
tender function is to give it a currency which it would not 
have of itself, and to keep it afloat after its natural deprecia- 
tion has begun. The result is to drive still more rapidly all 
true money out of the country, and in the end to impose 
upon the people still larger burthens of taxation. The cost 
of the Civil War in the United States was nearly doubled by 
the depreciation of the currency; and years of endurance were 
required to recover from the false conditions into which the 
business of the country was thrown. In the Revolution, still 
more serious losses followed from the same cause. 

3. From the causes already mentioned, paper money is 
liable to far greater fluctuations than gold and silver, unless 
closely tied to a metalHc basis by an absolute and easy con- 
vertibility into coin. In times of commercial prosperity, no 
danger appears, and no harm is felt; but when the great 
financial tempests — the commercial and industrial crises — arise 
(and they come as certainly if not as frequently as the atmos- 
pheric storms), the paper money is always found to be an 
additional source of danger. A commercial crisis is always 
also a monetary crisis. 

269. Banks and banking. — Closely connected with the 
subject of money, both in its origin and in its circulation, is 
the * subject of banks and banking. A bank is a monetary 
institution. Its business is to receive, keep, loan, and some- 
times to make and issue paper money. They are among the 
most necessary of modern business institutions, and their power 
over trade and commerce has attracted the attention alike 
of governments and economists. 



MONEY. 279 

Banks are of two chief kinds, — banks of deposit and 
banks of issue, or circulation. The banks of issue are also 
banks of deposit, so that in describing the functions of the 
latter we shall describe also much of the business of the 
former. 

Banks of deposit perform the following functions : 

1. They receive on deposit, for safe keeping, the funds of 
their customers. Sometimes, but not generally, they pay a 
small interest on these deposits. 

2. They loan money both from their own funds and from 
those of their depositors. These loans are sometimes made 
for long time, a year or more, on mortgages given as securi- 
ties, but more frequently as business loans to merchants and 
other business men, on short time, and on personal securities, 
on the note of the borrower, made directly to the bank, and 
called "bank paper;" or, on notes given by one business man 
to another in the course of trade, and cashed or discounted 
by the bank. These latter are called "business paper." 
Through the agency of banks of deposit, much of the money 
which would otherwise be hoarded, or kept in private safes, 
is sent into public use. 

3. They effect exchanges between their depositors or others. 
This work of the banks has grown into importance beyond all 
others, till it is difficult to see how modern business could be 
transacted, so immense is its volume, without the aid of the 
banks in effecting its payments. 

The depositor who wishes to pay a bill does not send 
to the bank for the money, but makes an order, called 
a check, upon his banker, and pays out this order in place 
of money. The receiver gets the money if he wishes, but 
most frequently deposits the check with his banker as so 
much cash. 

If both parties employ the same bank, the amount of the 
check is smiply transferred from the account of the maker 
to that of the holder, and thus, by the filling of a check 



28o 



POLITICAL ECONOMY, 



and an entry on the banker's books, the payment of thousands 
of dollars, it may be, is effected, without the counting or 
transportation of a single one. If each employs a different 
banker, the check is still deposited, and the settlement is 
made between the bankers, each of whom has probably re- 
ceived, during the day, many checks drawn upon the other, 
so that check balances check, and at last only a small sum 
needs to be carried from one bank to the other to complete 
the exchange of millions of dollars. The late President Gar- 
field, in 187 1, asked the Comptroller of the Currency to issue 
an order to fifty-two banks, in three groups, including banks 
in large cities, small cities, and in country towns, to report 
their receipts, analyzed for six consecutive days. ' ' During 
those six days," said Mr. Garfield, "$157,000,000 were re- 
ceived over the counters of the fifty-two banks; and of that 
amount, $19,370,000 — twelve per cent only — was in cash, and 
eighty-eight per cent (that vast amount representing every 
grade of business) was in checks, drafts, and commercial 
bills." 

Efforts have frequently been made to ascertain elsewhere 
the proportion of the daily exchanges effected by the use of 
checks. The following table is given in the annual report 
of the Comptroller of the Currency, for 1881, showing the 
percentages of coin, bank notes, and checks -received by 
bankers : 



LOCALITIES. 



New York, September 17, 1881 

London 

Edinburgh ' 

Dublin 

Country banks, Great Britain, 261 places. 



COIN. 


NOTES. 


PER CENT. 


PER CENT. 


•55 


.65 


'1Z 


2.04 


•55 


12.67 


1-57 


8.53 


i5^2o 


11.94 



PER CENT. 
98.80 

97^23 
86.73 
89.90 
72.86 



MONEY. 281 

270. Clearing-house. — The clearing-house is an associa- 
tion of banks designed to aid in the settlement of the balances 
between those banks. With the help of this institution, the 
power of the banks to effect payments and exchanges, without 
the counting of money, is greatly increased. It is reported 
that in the London clearing-house^ debts amounting to nearly 
$100,000,000 a day, are settled without the transfer of more 
than the comparatively small amounts required to meet the 
balances. Out of $167,437,759 received by forty-eight national 
banks in New York City, June 30, 1881, $165,254,164 was 
in checks and drafts, and of these the clearing-house certifi- 
cates amounted to $3,835,500. These certificates represented 
the amounts of balances to be transferred at the close of the 
previous day's business. The payments to the clearing-house 
banks, much as they are reduced, by this system of settlement, 
still require the daily transfer of an average of two and a 
quarter tons of gold, as stated by the Comptroller of the Cur- 
rency (report of 1881). 

The New York clearing-house association is composed of 
forty-five national and twelve state banks, and the assistant 
treasurer of the United Stales at New York. The total ex- 
changes effected through this clearing-house, during the year 
ending October i, 1881, were over $48,000,000,000, while 
the balances paid in money were less than $1,800,000,000. 
The daily average balances were nearly $6,000,000, or about 
three and five tenths per cent of the whole amount of the 
settlements. 

271. Banks of issue. — National bank system. — Banks 
of issue are those which, in addition to their other functions, 
are authorized by law to issue bills or notes to circulate as 
money. Many systems of such banks have been devised and 
tried in Europe and America, often with little success. The 
chief difficulty has been to make the notes stable in value, 
and to secure the holders against possible loss from any 
failures of the banks to redeem their bills. 

p. E.— 24. 



2 82 POLITICAL ECONOMY. 

The national bank system, now existing in the United 
States, has thus far proved the safest and most satisfactory 
of any system yet tried in this country. Prior to the act of 
Congress, passed in 1863, "to provide a national currency," 
all banks of issue and deposit in the United States were 
chartered by the states, each state having its own peculiar 
system; and the fluctuations in values of their notes, and the 
frequency of failures, were so great that daily "bank-note 
detectors," as they were called, were pubHshed, and were 
consulted constantly by traders to guard against taking bad 
or depreciated money. These detectors contained lists of all 
the banks of issue, amounting to over 1,400, and gave an 
account of the known counterfeits upon each, and the day's 
statement of the rate of discount at which the bills of each 
were to be received. 

The aim of the national banking law was to provide a 
national currency which should be uniform and safe. The law 
provided for a separate bureau in the United States Treasury 
department, the chief officer of which is denominated the 
Comptroller of the Currency. It further provides that banking 
associations may be organized with a capital of not less than 
$100,000, except that $50,000 capital might be allowed in 
places of not exceeding 6,000 inhabitants, and $200,000 is 
required in cities of more than 50,000, to continue in exist- 
ence twenty years; that stock holders shall be liable for the 
debts of the bank to the extent of their stock; that the asso- 
ciation shall deposit with the treasurer of the United States 
not less than $30,000, and less than one third of the capital 
stock paid in, in United vStates bonds, before commencing 
business; that each bank thus organized and approved is en- 
tided to receive from the Comptroller of the Currency, circu- 
lating notes equal in amount to ninety per cent of the market 
value, but not above the par value, of the bonds deposited — 
not exceeding eighty per cent to banks whose capital is 
$500,000 or over, seventy-five per cent to banks whose capital 



MONEY. 283 

exceeds $1,000,000, and sixty per cent to banks whose capi- 
tal exceeds $3,000,000; that each of the banks in certain 
chief cities shall at all times have on hand, in lawful money 
of the United States, an amount equal to twenty-five per cent 
of the amount of its notes in circulation, and each of the 
others of these banks shall keep a reserve of not less than 
fifteen per cent of its circulation. As all the circulating notes 
are furnished by the comptroller of the currency, and as the 
deposit of United States bonds more than covers the amount 
of notes issued, it is impossible that any loss can come to the 
bill-holders. Many of these banks have failed as banks, by 
bad management or speculation, but the notes of the broken 
banks are as good as those of the solvent ones, for the funds 
for the redemption of these notes are in the hands of the 
comptroller. The number of national banks in operation, 
June 30, 1881, was 2,115, with a capital of $460,227,835, 
not including a surplus of $126,000,000. October i, 1881, 
the national bank notes in circulation amounted to $320,199,- 
969 ; and the United States bonds held for their redemption 
amounted to $363,335,500. Besides the national banks, there 
are some state banks still in existence, though without circu- 
lation. 

There are also large numbers of private bankers who render 
important service in effecting the exchanges of the country, 
and lessen, by so much, the demand for money as a medium 
of exchange. The whole number of state, private, and savings 
banks, June 30, 1881, was 4,681, having a capital of $210,- 
738,203, or a little more than one third of the capital of the 
national banks. 



CHAPTER XXIV. 



PROPERTY. 



272. The wealth segment, — The discussion has now 
reached the third and final segment of our circle — the last 
grand division of the science of economy. 

We have seen how human wants, always advancing and 
multiplying with the advancement of civilization, have multi- 
plied the demands for wealth, and set in motion the arts 
which produce it. We have followed these arts and indus- 
tries in their growth, from small and rude beginnings, to the 
enormous activity and splendid power which at this hour fill 
the world of work. We turn now to study more attentively 
that countless mass and variety of valuable goods and products 
which constitute the world of wealth. 

Wealthy confined, in its infancy, to the few fruits gathered 
from the fields, and to the rude contrivances with which pri- 
meval man sought to sustain his life and to defend himself, 
or attack his foes, was of but little weight as a motive to ac- 
tion. These slender possessions scarcely appealing to his cu- 
pidity, rarely moved man to industry, or even to robbery. 
To-day wealth stands upon the earth, the most conspicuous 
object which meets the eyes or tempts the hearts of men. 
The globe seems covered with it. Thousands of cities — solid 
masses of wealth — crowd the continents. An infinitude of 
fabrics of every material, name, and use, are massed in store- 
houses, or are borne over land and sea. Man walks, lives, 

and works amid the rich and various creations of his own 

C284) 



PROPERTY. 



285 



hands; and these perpetually excite him to new efforts. The 
mightiest power upon the globe to-day is the money power, 
which is only the right-hand of the wealth-power. This power 
controls society, impels industry, and governs states. 

So imposing and potential is this wealth, so conspicuous 
and dazzling among the industrial phenomena, that many 
economists, as we have seen, have agreed in calling economic 
science the Science of Wealth. 

We have surveyed the wants which call wealth into exist- 
ence and give to it utility, and have discussed the great 
agencies of work by which its values have been shaped; but 
there remains a large segment of economic facts and truths 
which attach to wealth after it has issued from the creative 
hand of industry, and comes to stand before us an independent 
economic phenomenon. 

The following outline will serve to introduce us to this last 
field of our study : 



. , ^ f Ancient views. 

The right of property. I ^j^^^^^_ 

The property rights of society. 

Property -i The right to land and materials. 

Nature of property. 

_ ^ f Material. 

Forms of property. -\ ^ . , 

^ ^ -^ <- Immaterial. 

r Personal needs and rights. 



Distribution. 



^ Transformatic 



Force. 



Social conditions. 
Natural changes. 

f Wages ; theories, kinds, rate. 



Classes. 



Primary. 



Secondary. 



Interest ; theories, rate. 

Rent; nature, Ricardo Theory. 

Profits. 

-, . f Productive. 

Consumption.-^ ,... 

>. Destructive. 

Savings. 

f Safety. 



Investment. 



Laws. 



f. Profit. 



Territorial. 
International. 

Natural. 

Human. 
Constructive ; mental, moral, and social advancement. 



Destructive. 



2 86 POLITICAL ECONOMY. 

273. The right of property. — Ancient view. — The 

earlier economists accepted the right of property as a fact, 
and left its discussion to the philosophers and lawyers. Mod- 
ern economics, more searching and more profound, must meet 
this question also; must explain and defend property, not 
simply as a production, but also as a possession. 

It will seem strange to many to be told that the true notion 
of property, as now accepted among men, was not fully un- 
derstood nor received till near the close of the last century. 
Some of the opinions held will show how the minds of men 
groped in the dark, in their efforts to discover the truth. 
Montesquieu said : ' ' Men renounced their natural independ- 
ence that they might live under political laws; they renounced 
community of goods in order to live under civil laws. The 
first laws gained for them liberty; the second, property." 
Jeremy Bentham, agreeing with Montesquieu, affirmed that: 
' ' Property does not exist in nature ; it is consequently the 
product of the laws." ''I can not count," said he, "upon 
the enjoyment of that which I regard as mine, only on the 
promise of the law which guarantees it to me." Mirabeau 
said : ' ' Private property is goods acquired by virtue of 
the laws. The law alone constitutes property." Robespierre 
affirmed : ' ' Property is the right which each citizen has to 
enjoy the goods guaranteed to him by the laws." Grotius 
(15 83-1 645), nearly two hundred years earlier, taught that 
God had conferred upon the human race a general or com- 
mon right to all things; that each took for his own use what 
he wished, and consumed what he chose ; that matters re- 
mained in this state till the multiplication of men and of ani- 
mals upon the earth caused the lands which had been divided 
among the nations to be parted among families, and each ap- 
propriated that which he was able to seize. All these writers, 
it will be observed, leave out of sight the labor which creates 
property, and confound the right of property with the security 
which the law gives to that right. 



PROPERTY. 287 

These views will seem less strange if we consider the loose 
and uncertain tenure under which property was held in olden 
times. 

In the beginning, men take what they require, from the 
common stock of nature, and abandon what they can not use. 
The idea of property scarcely enters the mind. The occupa- 
tion of the soil was at first for a night; then, for a single 
harvest season; finally, for life. Land belonged to the tribe 
before it belonged to the family; to the family before it be- 
longed to the individual. 

When movable property began to accumulate, it was held 
by force, and taken by violence. In the middle ages, fortunes 
were obtained by craft or force. The labor which produced 
property was the labor of serfs or of slaves, who were seized 
and sold with the goods they produced. Land, labor, and 
harvests were seized and held by the strongest. The only 
notion of property Hkely to exist in such a state of society, 
was that it belonged of right to him that had the power to 
take it and keep it. When at length law came to restrain 
violence and to protect men in their rights, property was 
naturally thought of as the gift of law. The feudal chieftain 
owned, in some sense, the labor and the chattels of his feud- 
atories; and the rights of the laborer to the products of his 
industry were only partial rights, liable at any moment to be 
resumed by his lord. When the law took the place of the 
chieftain, it became, hke him, the source of rights and privi- 
leges. Only careful scholars can appreciate how slowly the 
ideas of property, liberty, and personal independence have 
made their way in the world. 

Sir Henry Maine and Emile de Laveleye have proved that 
the village community system of land-holding was once com- 
mon in England, Germany, and, indeed, throughout Europe, 
as also at the foot of the Himalayas, among the Hindoos; and 
as the idea of property, or of rightful possession, first de- 
veloped itself in connection with land and the products of 



288 POLITICAL ECONOMY. 

land, community of property must have been, and was, as 
naturally held as community of land. All investigations of 
the German and other European scholars show that this was 
the case. Individual property had little or no place or sacred- 
ness in the system. 

274. The right of property. — Modern view. — The 
emergence of the rights of man brought with it, as its neces- 
sary corollary, the emergence of the right of private prop- 
erty. The right of man to himself obviously includes the 
right to what he produces. This right embraces possession, 
enjoyment, and the power of alienation by gift or exchange. 
Such is the modern view. 

The right of property, like that of liberty, is a personal 
right. It rests upon nature, and not upon law. Law, or 
rather society acting under law, may be summoned to defend 
these rights; but law does not create them. Property comes 
from labor, and labor is the free effort of the laborer. As a 
free man he may labor or not, as he chooses. If he does 
not labor, nothing is produced; if he labors successfully, some 
value results, and this value belongs to him that created it. 
The laborer may sell his labor to another, taking in place of 
the product the wages which his employer gives. His sale of 
his labor is a virtual sale of the product, and this product 
belongs to him who bought it from its rightful owner. 

It is admitted that there is a kind of property which seems 
to be held by no right save the right of prior occupancy. 
Such is the right of the man who first takes a piece of land, 
or who appropriates any of nature's gifts which he may find 
unappropriated. It is against this kind of property that most 
complaint is made, and the complaint is sometimes extended 
to all property by the skillful confounding all other property 
with this. 

It must be admitted that simple occupancy can not give a 
permanent right to the thing occupied. So long as the occu- 
pancy continues, the man has a claim to remain undisturbed, 



PROPERTY. 289 

unless his occupancy is injurious to others who have an equal 
right; but when his occupancy ceases by his voluntary aban- 
donment of it, the land or other material thing occupied re- 
turns to the free state of nature, to be taken by the next 
comer. The occupant may, indeed, transfer his occupancy to 
another for a price; in other words, he may be hired to va- 
cate in favor of another waiting to take possession. This oc- 
cupancy must be a real one. Robinson Crusoe did not oc- 
cupy his whole island by simply living on or inclosing a part 
of it. His right extended only to so much as he used or 
held inclosed for use. As soon as the occupant has bestowed 
labor upon the land, or material, and fitted it in the least for 
human use, he has added value to it, and the case is 
changed. His right of occupancy is then changed to a right 
of property. 

Government, standing in the place of the body of society 
which it represents, holds the right of eminent domain over 
all unoccupied territory, and sells or grants it to private indi- 
viduals. In this case the right of property may be thought 
to come from the law, but if we carefully reconsider the nat- 
ure and origin of values, as explained in a previous chapter, 
it will be found that whatever value is involved, is the prod- 
uct, not of law, but of labor. The toil and expenditure of 
the American people, in estabhshing good government over 
our territories, and in creating manufactures and markets, has 
reflected a certain amount of value upon all the lands within 
these territories. The government sells this inchoate and re- 
flected value, and thus guards against the strifes also of rival 
occupants. 

275. The property of society. — The doctrine of Dugald 
Stewart, that property, or the right of property, derives its 
origin from two distinct sources, the one labor and the other 
the municipal institutions of the country, has this of truth in 
it : that some property, or value, is created by the common 
efforts of society, and that this property so created may be 

p. E.— 2S. 



290 POLITICAL ECONOMY. 

conferred by government, as the agent of society, upon some 
private individual. We may add here that on these values, 
created by the efforts of society, rests the right of government 
to tax private property. In taking taxes for the public use, 
society does but take its own. 

Society may be said to be a silent partner in every man's 
business. It acts as a watchman or guardian of the accumu- 
lating wealth. As this wealth increases in volume, the services 
of society grow larger; and there may come a point where 
the work and expenditure of society in guarding, is greater 
than that of the owner in creating, the property. But society 
does not act as guardian alone; it produces, by its mere pres- 
ence, and still more by its manifold interests and industries, 
the conditions which make large values possible. It is the 
presence of the multitudes of citizens which gives to city-lots 
their enormous values. Every man that erects a costly and ele- 
gant mansion adds to the price of the adjoining lots. A great 
manufactory or a railroad raises the price of land all around 
it. The values created thus by the public furnish the legiti- 
mate basis both for taxation and for that control which, in the 
last resort, or in cases of public need, government rightfully 
assumes to exercise. 

The valuable privileges and franchises granted by govern- 
ment to private parties or corporations, are to be explained 
in the same manner. The value of these franchises is the 
product of the general and common efforts of society. A wise 
and just government will only confer them for the good of 
society, and will carefully guard the rights of society in the 
terms of the grant. 

Thus all rights of property are seen to merge at last in the 
rights of man, since all property comes from labor. 

276. The right to land and materials.— A question 
of much delicacy and difficulty remains to be noticed in con- 
nection with the rights of property — a question which has 
already attracted serious attention, and which may hereafter 



PROPERTY. 291 

become a source of serious disturbances. Tliis question relates 
to the gifts of nature. It has been agreed that these gifts, 
including land, air, water, and all the materials which nature 
provides, are not themselves property till they are in some way 
touched by the hand of labor ; yet it must be remembered that 
they are the necessary conditions of productive labor. Without 
materials, labor is powerless to produce any thing valuable. 

Nature's gifts, though free, are limited in amount. There 
is a definite quantity of land, which can not be increased; 
and every acre of it that is taken by any one, leaves so much 
the less for the occupation of others. It is a supposable case 
that all the land, in some one country at least, may fall into 
the hands of a few wealthy men. In England, with a popu- 
lation of 35,000,000, less than 1,000,000 of men own all the 
land; and deducting those who possess merely city or village 
lots of less than one acre each, 269,547 land owners, or a 
little more than a quarter of a million, hold the farming lands ; 
while 5,000 owners possess fully one half of these lands; and 
the tendency is to steadily lessen the number of land holders, 
since the wealth made in other employments seeks the safe 
and honorable investment of lands. In Ireland, with a pop- 
ulation of nearly five and a half millions, 32,572 owners hold 
the farming lands. 

Is there a necessary limit beyond which men can not be 
permitted to monopolize the soil . and raw materials of the 
globe? This question begins to force itself upon the attention 
of mankind. 

To us, in this country, with its hundreds of millions of un- 
occupied acres, and its inexhaustable forests and mines, the 
question seems far away; but in England and Ireland it is 
near at hand, and the Enghsh government has, by its action 
in Ireland, determined that society, by its recognized agents, 
may step in between the land holder and his tenant, and put 
a limit to the property right of the land-owner in the land. 
The Parliamentary Commissioners fix the rents which the 



292 POLITICAL ECONOMY. 

landlords may demand, and which the tenants must pay, for 
the use of the soil. 

The doctrine advocated by such economists as Henry 
George (in "Progress and Poverty") and by Proudhon (in 
" Qu 'est — ce que la propriete"), who deny the right of prop- 
erty in land, and would have the soil held by the government 
as a common possession, involves a serious fallacy in its dis- 
crimination between land and other material gifts of nature. 
Land, it may be granted, is the most important of all mate- 
rials, not only from its amount and its necessity to food pro- 
duction, but also because the occupancy of some part of it is 
a need of every being that lives upon the earth's surface. 
Every man must live and walk upon the land, for at least 
some part of his life. But all production of material wealth 
involves the appropriation of some of nature's gifts. In every 
article of value there is a basis of material substance which 
belonged, originally, equally to the whole human family, or 
at least as much to all as to any. It is the primary condition 
of productive labor that.it shall be permitted to take from the 
common stock, and appropriate to private use, the materials 
it needs for its fabrics; but it is to be remembered that it 
takes that which has commonly no utility to change it into 
something useful. To refuse materials is to forbid labor; and 
to deny to labor its right of property in its products on the 
ground of the common right to the materials used, is to sub- 
ject a higher and useful right, that of the laborer to himself 
and his own activities, to a lower and doubtful one, that of 
mankind to the crude materials. 

The remedy for the inequality of property is not to forbid 
all property. "Suicide is not a remedy." The safeguard 
against the final catastrophe which such economists seem to 
fear, is to be found in that final paramount claim which soci- 
ety has to life and to its conditions, and which it will not be 
slow to exert when the occasion demands, as in the case of 
the English Parliament in its treatment of the Irish land ques- 



PROPERTY. 293 

tion. One may not be able to say beforehand what society 
wil] or should do, but it is certain that, in the last resort, 
men will, by reformation or revolution, rectify the wrongs 
which creep into human policies, and which become at last 
dangerous to the common safety. The right of self-preserva- 
tion in man and society overrides all other rights. 

277. The nature of property. — In the discussion of 
value, it was shown that ownership was one of its constant 
and necessary elements. The very exchangeability or purchas- 
ing power which some economists so much insist on, and claim 
to be the essence of value, presupposes and depends upon 
ownership. Without ownership there can be no rightful trans- 
fer or exchange of goods; and exchange, if made without 
ownership, confers no right. 

In our inscribed triangle of value (see page 40), we have 
shown that value — and we include in this statement every form 
and object of value from a pin to a palace — presents three 
aspects; its utility looks forth towards the human wants it is 
fitted to satisfy; the effort required in its production relates it 
to the world of work, by whose agencies it can alone be pro- 
duced or replaced; and, finally, its ownership puts it in the 
world of wealth, — constitutes it property, and counts it among 
the things possessed by mankind. 

In values looked at as property, this fact of ownership is 
the most conspicuous of all. The whole discussion thus far 
made in this chapter, shows the question of ownership princi- 
pally in sight. The right of property is the right of owner- 
ship and all that ownership implies. We may, therefore, 
properly define property as goods possessed by an owner. 

It was a strange mistake of an American economist of some 
reputation, who affirmed that Robinson Crusoe, on his island, 
had no property, because there was no one there with whom 
he might exchange his goods. By the same rule he might 
have affirmed that the products of a great mill are not prop- 
erty while they lie in the mill, remote from market, or are on 



294 POLITICAL ECONOMY. 

their way across the ocean, because that then and there, 
where they happen to be, there is no market, and no owner 
to exchange them. If the owner chances to come on board 
with a customer, they immediately become property. A won- 
derful transformation ! He apparently does not see that ex- 
changeability presupposes all the real elements of property — 
usefulness, difficulty of production, and ownership. 

278. Forms of property. — Material. — Property has as 
many forms as there are classes of valuable goods. The 
chief economic division is into material and immaterial prop- 
erty, the former including all goods that have a material sub- 
stance as their basis, and the other consisting in valuable 
rights, franchises, and privileges. 

The law divides all material goods into realty or fixed prop- 
erty — property fixed in place as houses and lands; and per- 
sonal or movable property, including all not fixed. This 
division, taken in a large sense, has some economic advan- 
tages as helping to show some of the economic differences 
between the two classes. 

Fixed property, including land and all its ameliorations, and 
the structures erected upon it, can only be used or sold with- 
out removal. It knows no distant market, and suffers no 
charges for transportation. It fears no robbery, and com- 
monly changes but slowly in its values. It is made up, 
chiefly, of nature's gifts, and derives its chief utility from the 
control it gives over the producing energies of nature. It 
ministers mainly to the vital wants of mankind — the demand 
for food and shelter, and, except in cities and their vicinity, 
it is hable to little fluctuation and to slight decay or danger 
of destruction. It becomes thus a favorite form of invest- 
ment for the surplus wealth gained in the more remunerative 
pursuits. 

Movable property is much more varied in character. It 
includes the innumerable classes of manufactured goods, and 
the gathered and transformed products and fruits of nature. 



PROPERTY. 



295 



These goods usually require transportation to distant markets, 
are exposed to the risks and charges of transportation, and 
require for their storage and distribution the skill, labor, and 
capital of a host of mediaries or middle-men, whose labors 
and profits add immensely to the original cost. They appeal 
largely to the less constant desires of mankind, and take their 
values from the artificial and perishable forms given by human 
art and labor. Short-lived, they demand large profits to in- 
duce their perpetual reproduction, but are commonly unsuited 
to permanent investment. 

All material property is subject to loss and decay. Even 
land, left without care, becomes infested with weeds and nox- 
ious or cumbering growths, which lessen its value and require 
new labor to restore it to its productive condition. The less 
perjnanent forms of property decay or lose value still more 
rapidly. The wealth of the world is maintained by being 
constantly reproduced; poured into the Segment of Wants, it 
reappears from the Segment of Work. 

The grand aggregate of the wealth of the world can not be 
even approximately known. Estimates of the wealth of some 
of the more civilized peoples have been made, and we borrow 
from a recent work the following statements of the wealth of 
a few of the leading nations in 1880: 



The 


wealth of Great Britain . 




$44,800,000,000. 


The 


wealth of the United States 


39,400,000,000. 


The 


wealth of France .... 


37,085,000,000. 


The 


wealth of Germany . . 




30)3 7 5 jooo, 000. 


The 


wealth of Russia . . . 




17,700,000,000. 


The 


wealth of Austria . 




15,250,000,000 


The 


wealth of Italy .... 




9,300,000,000. 


The 


wealth of Spain . . . 




6,865,000,000 


The 


wealth of Holland . , 




5,650,000,000. 


The 


wealth of Belgium . . 




4,700,000,000. 


The 


wealth of Turkey . . . 




3,800,000,000 


The 


wealth of Sweden and Norwa 


y 3,690,000,000 


The 


wealth of Canada . . . . 


3,180,000,000. 



296 POLITICAL ECONOMY. 

In the great aggregates of material wealth, the fixed prop- 
erty tends to increase, relatively, faster than the movable, 
both because more durable and because attracting investments. 
In 1880, the value of farms in the United States was over 
$10,000,000,000. If we add to this the real estate of cities 
and villages, and the capital invested in manufactories, we 
shall find that it largely exceeds the entire amount of personal 
or movable property. In 1874, the entire taxable property of 
Massachusetts was $2,164,398,548, of which $1,289,308,763, 
more than one half, was real estate. In 1880, the total 
valuation of property of all sorts, in the state of Ohio, 
was $1,545,746,600; of this the real estate amounted to 
$1,102,677,704, the personal property to only $443,068,896. 

279. Immaterial property. — The older economists were 
disinclined to allow the existence of any property except that 
which was found in material forms. They could not conceive 
of values which had no visible substance or local habitation. 
They were familiar with valuable rights and privileges, but 
did not count them as property. A more careful analysis of 
the nature of property has led men to see that intellectual 
labor is also productive of values, and that these values ac- 
knowledge the natural law of ownership as well as those found 
in material products. 

Of the several classes of immaterial or intellectual property, 
the most common are copyrights and patent-rights. 

A copyright is a legal recognition of the property interest 
which an author has in the book he has written, or the pict- 
ure, chart, map, or other literary or artistic product of his 
labor. 

The manuscript in which he has recorded his thought-prod- 
ucts, is a material thing, and the author has the same right 
to it that a hatter has to the hat he has made. He may 
keep it or sell it; lend it for a price, or destroy it altogether. 
No one will question his perfect property-right over the man- 
uscript he has written. Copyright is simply the right to make 



PROPERTY. 297 

copies of his book or to allow others to make copies. As 
these copies can be made cheaply and in great numbers by 
the art of printing, and the printed copies are more desirable, 
in general, than the original manuscript, this right of copying 
becomes very important to the author. His work may have 
cost him years of hard and difficult labor; but from the mo- 
ment that printed copies of his book appear, his own manu- 
script becomes almost worthless. It is to his right to make 
copies that the author must look for any adequate reward for 
his labor. Modern governments have justly recognized this 
right of the author, and have made laws to secure to him the 
copyright. 

From considerations of public good, as it is claimed, most 
governments limit this right to a fixed number of years. 
These laws seem based upon the idea that copyright is of the 
nature of a monopoly, and should, therefore, be limited in 
duration. Considering copyright as property, this legal limita- 
tion of its enjoyment is as unjust as it would be to limit the 
time during which the builder of a house may claim it as his 
own. 

The first copyright law in England was enacted in the reign 
of Queen Anne. In the United States, the constitution au- 
thorizes Congress to make laws securing copyrights and patent- 
rights as a means of encouraging art and learning. Under 
the present law, passed in 1870, the United States allows to 
authors the privilege of copyright for a period of twenty-eight 
years, and gives to the author himself, his widow or children, 
the right to renew it for fourteen years in addition. In 
England, the copyright endures for forty-two years, or for the 
life-time of its author and seven years beyond, or more, if a 
longer time is necessary to make up the forty-two years. 

280. Patent-rights, — ^A patent-right is the right of the 
inventor, guarantied by letters-patent issued by the govern- 
ment, to the exclusive manufacture, sale, or use, of his inven- 
tion. Patents in the United States run for seventeen years 



298 POLITICAL ECONOMY. 

without privilege of renewal, and may be obtained by the 
inventor for any new and useful "art, machine, manufact- 
ure, or composition of matter, or any new and useful im- 
provement thereof." Thus it applies to processes, machines 
or parts of machines, designs, chemical compounds, and 
medicines. 

Patent-rights are looked upon by most nations with much 
less favor than copyrights, and some countries refuse to grant 
patents at all. But it is evident that the inventor has a prop- 
erty-right in his invention, and that the securing of this right 
tends to promote the activity of invention. 

The inventor usually secures the benefit of his invention by 
a sum called a royalty, paid him by the manufacturers on 
each machine or article manufactured under his patent. To 
the manufacturer it serves as a monopoly-right, shielding him 
from competition. Many inventions owe their final success 
and use more to this privilege guarantied to the manufacturer 
than to the merit of the invention itself. Few out of the 
thousands of patents issued annually prove remunerative to 
the inventor; but, in extraordinary cases, as in that of the 
Howe's sewing-machine, and in the vulcanized rubber goods, 
the fortunes made by the inventors are enormous. 

No census can be taken of the property existing in copy- 
rights and patents, because, being in the nature of rights, 
their value depends entirely upon the use of them. As eco- 
nomic facts they are of much importance, absorbing large 
amounts of skill and labor, controlling production and manu- 
facture, and giving new turns to industry. 

281. Franchises. — There is another species of immaterial 
property, consisting in the franchises or privileges granted by 
governments to individuals, or to corporations. In ancient 
times these franchises were very numerous and were frequently 
given by monarchs to favorites, or sold as a means of raising 
revenue. In modern times they are conferred with more 
care, and usually to secure the construction of some public 



PROPERTY, 299 

work, or the performance of some public function which it is 
supposed will not be undertaken without such franchise. Thus, 
the privilege is granted to the national banks to issue bills to 
be circulated as money; or to a railroad company to construct 
and operate a given hne of railroad, free from immediate 
competition. The value of the franchise, in these cases, is 
evidently a product of the presence and work of society; and 
government, acting in the place of society, sells the privilege 
for the benefit which it is supposed will result to society from 
the work done. That these franchises are to be considered 
as a species of property is evident from the fact that they are 
often sold by the original corporators before a stroke of work 
is done under them. Railroad charters have frequently been 
thus sold in this country. 

The good-will of an established business is of the nature 
of a private franchise, the value of which has been created 
by the long services of the tradesman to a given circle of 
customers. This good-will is often of great value, and, in the 
case of an old and well established newspaper, is sometimes 
the most valuable part of the property. The seller of good- 
will agrees to leave the business, and thus, as far as possi- 
ble, turns his clients, customers, or subscribers over to the 
purchaser. 

Debts, or the notes, bonds, or other evidences of debt, are 
usually counted as property; but it is clear that debts are but 
claims of ownership on property supposed to be in the hands 
of the debtor. If A buys a farm from B, paying $5,000 in 
cash, and giving a bond and mortgage for the $10,000 yet due, 
the bond does not increase the amount of property in exist- 
ence; it only shows that the real ownership of so much of the 
value of the farm still remains in B, the original holder. The 
total interest-bearing debt of the United States outstanding 
July I, 1 88 1, and represented b)^ government bonds, was 
$1,639,567,750. These bonds were held as property by those 
who had purchased them ; and to them they stand as so 



300 POLITICAL ECONOMY. 

much wealth, which they may keep or sell. But these bonds 
represent only an ownership of so much of the taxes or taxable 
property of the country, which the government engages to 
take and turn over to the bond-holders according to the terms 
of the bonds. These bonds neither increase nor diminish the 
volume of the nation's wealth; they simply show ownership. 
This ambiguity of ownership has its chief disadvantage in 
the double taxation it induces. The holder of a mortgaged 
farm, for example, is taxed for the entire assessed value of the 
farm, though he may be the owner of only half its value. 
Then the holder of the mortgage is taxed for his interest in the 
farm, or, as it is generally put, for the mortgage he holds ; and 
so the farm is taxed double on that part of its value covered 
by the mortgage. 



CHAPTER XXV. 



THE DISTRIBUTION OF WEALTH. 



282. Forces of distribution. — Wealth tends not only to 
constant fluctuations, but also to incessant movement. Like 
the tides and currents of the ocean, it obeys great attractions 
from above and from beneath, and yields to its surroundings 
as the waves yield to the resistless pressure of winds and 
coast-lines. 

The forces which cause the grander movements of wealth 
are to be found : 

1. In the personal desires and business needs of men; 

2. In the general conditions and movements of communities 
and nations; 

3. In the agencies and accidents of nature and history. 
The intense desires of men to amass property, to employ it 

profitably in business, and to secure it in safe and profitable 
investments, act as a complex and incessant force to draw 
wealth from hand to hand; to carry it to this place and that, 
and to gather it at the promising points of investment. Under 
the action of this set of forces, property is constantly changing 
hands and flowing to remote localities. 

Communities and peoples influence the flow of wealth by 
their civilization, by their legislation, and by all the influences 
and characteristics which aflect the safety and determine the 
enjoyment of wealth, or give honor and dignity to industry. 
Good morals, liberty, high intelligence, and respect for labor 
draw wealth as magnets draw iron. 



302 POLITICAL ECONOMY. 

Natural accidents — like the potatoe-rot in Ireland, the phil- 
loxera in the wine-growing regions of France, the presence 
of a sweeping epidemic like the yellow fever in the South, a 
season of drought as in India, floods and earthquakes, or 
wars and riots — often change for a time, if not permanently, 
the movements of wealth. 

283. Classes of distribution. — We may properly distin- 
guish between four great classes of distributive movement; as 
follows : 

1. The primary distribution to the several producers, and 
especially the division of products between labor, capital, and 
the pay or profits of management. 

2. The secondary movement or distribution made by the 
owners to consumption or to investment. 

3. The territorial movement from place to place, as from 
city to country, or from country to city. 

4. An international movement of wealth between nations or 
countries. 

All the forces enumerated in the preceding section will 
be found at certain times affecting each of these four dis- 
tributions. 

284. Primary distribution, — Values are produced by the 
application of capital and labor to nature's gifts. If the capi- 
tal and labor are furnished by the same owner, the product 
evidendy belongs to him. But in most cases, in the modern 
industries, the capital is furnished by one party, and the 
labor is performed by others; and frequently the work is 
planned and directed by a third party. In these cases, the 
resulting products belong to the several parties contributing to 
the production; and to each in proportion to the cost, or 
value, of his contribution. 

Labor, capital, and management, each claims its share of 
the new values produced by their joint efforts. But this is 
on the supposition that they are all partners in the work, that 
they all share in the risk of the enterprise, and that they have 



THE DISTRIBUTION OF WEALTH. 303 

not, in any other way, received the price or value of their 
contribution out of the aggregate product. 

Commonly, the laborer is unprepared to share any risks, or 
even to await the completion of the final products; and often 
the capitalist declines to run any risks, and prefers a surer, 
if also a smaller, return in some fixed sum paid for the use 
of capital. Hence, in the modern industries, capital is fre- 
quently borrowed, and labor is commonly hired. The laborer 
accepts wages in place of his share of the products, and capi- 
tal takes its share in interest money. If the manager is also 
a hired and salaried agent, he, too, takes his legitimate share 
of the values he has helped to produce, in his wages or 
salary. 

In most great industrial enterprises, the use of lands and 
buildings is involved. These, too, enter usefully into the pro- 
duction; their values are in part consumed, and should reap- 
pear in the new values produced. The share which thus goes 
to land and buildings is taken in the form of rent. It is true 
that, in general, the land and buildings may be considered a 
part of the capital invested in the plant; but in agriculture, 
the land holds so prominent a place, that men have chosen to 
recognize its rent as differing in its methods of computation, 
if not in its principles of right, from other forms of capital. 

Should the new products chance to exceed the several sums 
thus set apart or paid for wages, interest, and rent, this sur- 
plus, whether little or much, evidently belongs as profit to 
the party, whether manager, or laborer, or capitalist, or stock- 
holder, who assumed the risk. If all shared the risk, it be- 
longs to all; but if only one party out of all assumed this risk,^ 
after paying the others their full and rightful shares, he may 
take as legitimate profit all that remains. If there had been 
a deficiency, he would have been held to make it good. . 

The primary distribution of wealth, therefore — the distribu- 
tion to the original producers and owpers, — is into wages, in- 
cluding all salaries and sums paid for services; interest on cap- 



304 POLITICAL ECONOMY. 

ital used or invested; re7it on lands and buildings; and, finally, 
profits which may be regarded as the pay for risks. All of 
these enter into every new article of value which is produced, 
whether they come all from one hand or from many. 

285. Wages. — Two theories. — Wages may be regarded 
either as a share of products, or as the price of labor. Both 
views are common; and both represent a truth. 

This double aspect of wages grows out of the double char- 
acter of labor or working power. First, looked at as a pro- 
ducing effort, it is seen to enter into its product, a-nd to re- 
main there incarnate and crystallized, as it were, in its result. 
It claims the result as its own offspring and possession. But, 
in the second aspect, labor is simply laboring-force without 
aim or object, offered in the market, and sold for its market 
price to any one who desires to employ it upon his own ac- 
count. The employer looks upon and uses the hands and 
strength of the laborer as he uses his own— to accomplish any 
piece of laber he has planned. The laborer counts himself to 
have sold this use of his laboring power, for a stipulated price 
which is entirely independent of the product to be obtained. 
In that product he takes no risk, and claims no part; he 
works for the wages and not for the product, and he rightly 
regards that product as belonging to the man who planned it, 
and furnished the material and labor for it. 

Both theories of wages are in common use. It is not un- 
common to find men working ''upon shares," as it is called — 
that is, agreeing to receive as their wages a certain share of 
the products. In some of the simpler forms of mining, in 
fishing, in chopping, and in gathering the fruits of the or- 
chards, the laborers frequently work for a specified part of 
the products. In these cases, the laborer does not ordinarily 
look upon himself as selling his labor. He simply takes his 
rightful share of products, leaving to the owner of the mine, 
the forest, or the orchard the share which rightfully belongs 
to him. But the more common usage is for the laborer to 



THE DISTRIBUTION OF WEALTH. 305 

seek an employer who has work to be done, and offering his 
labor, for a fixed wage, to do what the other directs. 

286. Piece wages and time wages. — Labor may be 
sold to accomplish a given work, or for a given time. In 
the first case, the laborer agrees to do a certain thing for a 
given price; in the other, he agrees to work a certain time 
for a stipulated sum. The first includes what is known as 
''working by the piece;" the second is work by the hour, 
the day, the month, or the year, according to the time sold. 
Wages paid for the former are called piece-wages, and those 
for the latter, time- wages. 

In piece-work, the efficiency of labor is more fully recog- 
nized and kept in view, and, economically, it is found more 
valuable and productive. The laborer surrenders himself less 
fully to the direction of another, and assumes less of the atti- 
tude of the mere machine. He looks upon his labor as his 
own, and consciously puts it into his products; and in the 
end he seems to offer his work, and not himself, as the ex- 
change for the wages paid him. If he has superior skill and 
quickness, he profits by them to produce more and better 
products, and to gain better wages thereby. 

In time-work, the laborer surrenders himself fully to the 
will of his employer, for the time agreed upon, to do what-^ 
ever he is directed, under such hmitations as may have been 
established by custom or by the contract. He agrees to use, 
within the prescribed hours, whatever force or skill he may 
have, upon whatever work is placed before him, and is not 
at all responsible for the choice of the work nor for its eco- 
nomic result. If he takes any personal interest in his work 
and its products, it is either because the artist spirit in him 
will not allow him to be indifferent, or because he recognizes 
that a certain measure of effectiveness in work will enable him 
to sell his labor more readily, and, perhaps, command higher 
wages. In time-work, as the labor is more absolutely sold, so 
the control and use of it is more absolutely held by the 

p. E.— 26. 



3o6 POLITICAL ECONOMY. 

purchaser. In many employments this is more important than 
the superior efficiency of piece-work, and the employer vol- 
untarily assumes something more of risk for the sake of the 
more complete control. He wants his man, like his machine, 
to obey strictly his will ; and he relies upon the perfection of 
his system to make both man and machine do their best. 

Time-wages and piece-wages, though thus differing in the 
theory of their earning, are both, in the last analysis, to be 
regarded as the share which labor produces, and takes for its 
own, in the new values created. The right to take wages is 
the right of labor to its own products. 

287. The share of wages. — To determine the share of 
production which should go to the payment of wages, is one 
of the most difficult problems of practical economy. And the 
difficulty is increased by the fact that wages have mostly 
ceased to be considered as a share of the product, and are 
now looked upon as the price of labor. Most of the econo- 
mists are disposed to count labor as a commodity, offered in 
the market, and obeying the ordinary market laws of supply 
and demand. When work is scare and laborers are abundant, 
wages will be low ; but when work is abundant and laborers 
are in deficient numbers, wages will be high. Such is the 
common accouiU of the matter, and, within a §mall range of 
very common labors, the account is near the truth; but, taken 
on the largest scale, there are other factors which enter into 
the problem, and which modify largely the results. As a 
commodity, labor has two features which distinguish it radi- 
cally from all other commodities, i. The labor of to-day, if 
not sold to-day, can not be kept till to-morrow. To-day's 
labor-power, if not sold and used to-day, is lost. To-morrow 
can only sell and use its own labor-power. 2. Labor is, in 
general, the laborer's only commodity; its sale and employ- 
ment are his only means of sustaining life. He must labor 
in order to live. If his work is to be wanted next month, 
or next year, he must be sustained till that time, and must 



THE DISTRIBUTION OF WEAITH. 307 

be employed in order to be sustained. From these features 
of labor, it results that the laborer is, in general, under a strong 
necessity to sell his labor, and to sell it for enough to meet 
his wants; and, on the other hand, there is an almost equally 
strong necessity upon the employing class to provide work for 
laborers. For example, the great iron and cotton industries 
can not afford to lose from the country the large supply of 
iron-workers and cottourspinners. 

Many other circumstances and conditions interfere with the 
distribution of that part of wealth which goes to labor as 
wages, and with the rate of wages. The competition of mas- 
ters and of men; the state of the markets; the supply of cap- 
ital; the opening or closing of contemporary industries; the 
variation in prices of the goods produced by the labor in 
question; the fluctuations of foreign demand for goods or for 
men; the fruitfulness or scarcity of the agricultural season; 
the presence of war or peace; great social or industrial dis- 
turbances, such as labor-strikes or lock-outs; the discovery 
of some new and important source of wealth and field of 
labor, like the discovery of the gold mines of California, in 
1848; and especially the great financial and industrial crises, 
which come Hke periodic storms, and sweep over the com- 
mercial and industrial world, and which usually break up the 
labor market, turn thousands of laborers partly or wholly out 
of employment, and push wages down to the lowest living 
point.. It is not difficult, in any given case, to trace the 
fluctuation of wages to its proper source; but it is rarely pos- 
sible to apply any remedy to save labor, for the time, from 
the consequences of the causes then operating. 

The competition between labor, capital, and management, 
for the lion's share of the wealth produced, involves princi- 
ples of Political and Social Economy which take it mainly out 
of the domain of the pure economic science. The remedies 
proposed to secure a fairer and more equitable distribution 
belong to two great classes — those of combinations and those 



3o8 



POLITICAL ECONOMY. 



of cooperation. The former work through trades-unions and 
other labor associations which combine labor against capital; 
the latter, through cooperative organizations which seek to 
combine labor, capital, and management in the same hands, 
and thus prevent their competition in the distribution of prod- 
ucts. The discussion of these remedies belongs to another 
branch of the subject. 

288. What share labor gets. — The proportion that labor 
now takes of the new production can be seen by a few ex- 
amples. The following statements are collected from the 
census bulletins of the census of 1880: 













PER 


INDUSTRY. 


CAPITAL 


VALUE OF 


VALUE OF 


TOTAL 


CENT OF 


INVESTED. 


MATERIALS. 


PRODUCTS. 


WAGES. 


NET 












PRODUCT 


Iron and steel 


$230,971,884 
8,225,760 


$191,271,150 
22,005,576 


$296,557,685 
4,817,636 


$35,476,785 
1,256,113 


33-6 

44.6 


Salt manufactures 


Glass manufactures 


i9>4i5,599 


7,991,303 


21,013,464 


9,112,301 


69.9 


Coal-mining, anthracite 


150,161,196 


6,439,437 


40,331,981 


21,680,120 


61. 


Coal-mining,bituminous 


101,996,037 


4,851,093 


52,316,968 


32,535,460 


68.5 



If from the total annual products, in each case, we take 
the cost of materials used up in the work of the year, we 
may easily ascertain the percentage of the net products which 
went to labor in the shape of wages. Thus, in the iron and 
steel industries, in which the capital and material largely ex- 
ceeded the gross products, 33.6 per cent went into wages; 
the remainder went, of course, into interest, rent, royalty, 
taxes, incidental expenses, and profits. In the salt manufact- 
ures, labor took 44.8 per cent of the net products; in the 
glass manufactures, in which capital and materials hold a less 
proportion to gross products, labor took 69.9 per cent. In 
the anthracite coal-mining, labor took 61 per cent; in the 
bituminous coal-mining, it took 68.5 per cent of the net 
production. The wages per man will be found to depend on 
the skill required in the work. 



THE DISTRIBUTION OF WEALTH. 



309 



The following table, giving wages per week of several 
classes of laborers, in different countries, is borrowed from 
the report of the state department on the state of labor in 
Europe, 1878: 



Occupation. 




w 

2 

< 

(I. 


>• 
z 

< 
s 

K 
W 



> 

< 




z 

< 


z 


Q 
Z 

< 

h 

8 



> 

w 
z 


< 


s 


Brick-layers... 


$6.00 


$4.00 


$3-6o 


$3-45 


$8.12 


$9.63 


$12. CO to 


$15.00 


$ 6.00 to 


$10.50 


Carpenters 


5-4° 


5-42 


4.00 


4.18 


8 


25 


8.12 


9.00 to 


12.00 


7.50 to 


12.00 


Gas-fitters 


5-40 




3.65 


3-95 


7 


25 


8.40 


10.00 to 


14.00 


10.00 to 


12.00 


Masons 


6.00 


5.00 


4-30 


4.00 


8 


16 


8.28 


12.00 to 


18.00 


12.00 to 


15.00 


Painters 


4.20 


4.90 


3-92 


4.60 


7 


25 


8.16 


10.00 to 


16.00 


6.00 to 


12.00 


Plasterers. 


5.40 




3.80 


4-35 


8 


10 


10.13 


10.00 to 


15.00 


9.00 to 


15.00 


Plumbers 


6.00 


5-50 


3.60 


3-9° 


7 


75 


7-13 


12.00 to 


18.00 


12.00 to 


20.00 


Bakers 


4.40 
4.40 


5-55 
5-45 


3-50 

3-55 


3-90 
3-94 


6 


50 
12 


6.60 


8.00 to 


12 00 


8 00 to 


12 00 


Blacksmiths... 


8 


7.04 


10.00 to 


14.00 


9.00 to 


12. CO 


Book-binders. 




4.85 


3-82 


3-9° 


7 


83 


6.50 


12.00 to 


18.00 


9.00 to 


20.00 


Brass-found's 






3.20 


5-49 


7 


40 


6.90 


10.00 to 


14.00 


8.00 to 


15.00 


Butchers 


4-50 


5.42 


3-85 


4.20 


7 


23 


4-75 


8.00 to 


12.00 


12.00 to 


18.00 


Cabinet-mak's 


4.80 


6.00 


3.97 


4-95 


7 


70 


8.48 


9.00 to 


13.00 


7.00 to 


15.00 


Coopers 




7.00 


3-30 


4-35 


7 


30 


6.10 


12.00 to 


16.00 


6.00 to 


15.00 


Coppersmiths 






3-30 


390 


7 


40 


7.10 


12.00 to 


16.00 


15.00 to 


20.00 


Cutlers 




4.63 


4.00 


390 


8 


00 


6.25 


10.00 to 


13.00 


15.00 to 


20.00 


Engravers 







4.C0 


4.00 


9 


72 


8.75 


15.00 to 


25.00 


9.00 to 


30.00 


Horseshoers... 




5-40 


3-25 


3-50 


7 


20 


7.00 


12.00 to 


18.00 


15.00 to 


25.00 


Mill-wrights... 






330 


4-95 


7 


50 


7-50 


10.00 to 


15-00 


12.00 JO 


20.00 


Printers 




4.70 
5-00 


4.80 
3.60 


3-9° 
3-90 


7 
6 


75 
80 


7.52 


8.00 to 


18.00 


12.00 to 


18.00 


Harness-mak. 


4.80 


6.15 


12.00 to 


15.00 


6.00 to 


12.00 


Sail- makers... 






3-3° 


3-90 


7 


30 


6.33 


12.00 to 


18.00 


12.00 to 


15.00 


Shoe-makers.. 




4-75 


3.12 


4'32 


7 


35 


7-35 


12.00 to 


18.00 


9.00 to 


18.00 


Tailors 




S-io 


3-58 


4-30 


7 


30 


7.00 


10.00 to 


18.00 


6.00 to 


18.00 


Tinsmiths 


4.80 


4.40 


3.65 


3.60 


7 


30 


6.00 


10.00 to 


14.00 


Q.OO to 


12.00 


Laborers 


3.00 




2.92 


2.00 


5 


00 


4-50 


6.00 to 


9.00 


5-5° to 


9.00 



As real wages, or wages measured in the goods which the 
laborer would get for his work, differ from nominal or money 
wages in proportion as the prices of necessaries which wages 
must purchase vary, we collect, from the same reports, the 
following statement of prices of the necessaries of life in 
several of the countries named : 



3IO 



POLITICAL ECONOMY. 



ARTICLES. 


D 

I 

III 


u 
u 

< 


>■ 
z 

<; 
S 

K 
[I] 



< 


Q 
Z 

< 


2 



> 

z 
z 





< 
y 
K 






CTS. 


CTS. 


CTS. 


CTS. 


CTS. 


CTS. 


CTS. 


Bread, per pound 


4 to 5 


3 


3 to 7 


6 


3>^ to 


4K 


4 


to 


4^ 


4 


to 4^ 


Flour, per pound 




4 


s% 


10 


3^ to 


4^ 


3 


to 


4 


^% 


to 4^ 


Beef,roast,per pound 


20 


22 


22 


20 




22 


I2>^ 


to 


16 


8 


to 12)^ 


Bacon, per pound 


18 


20 


20 


22 


12 to 


16 


8 


to 


10 


7 


to 12 


Lard, per pound 


20 


20 


21 


22 


15 to 


18 


ID 


to 


12 


6 


to 10 


Butter, per pound 


20 to 50 


25 


22 


28 


29 to 


38 


25 


to 


32 


16 


to 40 


Potatoes, per bush. 


56 


50 


50 


I-I5 


1.12^ to 


2.00 


1.40 


to 


.60 


60 


to 80 


Milk, per quart 






4 


7 


6 to 


9 


8 


to 


10 


3 


to 6 


Sugar, per pound 


15 to 20 





II 


8^ 


53^ to 


9 


8 


to 


10 


7 


to ID 


Coffee, per pound 


30 to 40 


30 


35 


32 


28 to 


42 


2D 


to 


30 


16 


to 40 


Soap, per pound 





...... 


10 


4 


5^ to 


9 


6 


to 


7 


3 


to 8 



289. Wage-fund and wage-rate. — Almost interminable 
discussions have been made to show the causes which affect 
the rate of wages, and the reasons of differences between 
wages in different employments and in different countries. It 
has been a favorite doctrine among one school of English 
economists, and some Americans, that there is a certain nearly 
fixed sum out of which all wages are paid, and which consti- 
tutes, therefore, what may properly be called the Wage-fund. 
Even J. Stuart Mill seems to believe in the existence of such 
a fund, which he describes as "that part of circulating capi- 
tal which is expended in the direct purchase of labor;" to 
which must be added, also, ' ' all funds which, without form- 
ing a part of capital, are paid in exchange for labor, such as 
the wages of soldiers, domestic servants, and all other unpro- 
ductive laborers." 

"There is supposed to be," says Mill, elsewhere, "at any 
given instant, a sum of wealth which is unconditionally de- 
voted to the payment of wages of labor. This sum is not 
regarded as unalterable, for it is augmented by saving, and 
increases with the progress of wealth; but it is reasoned upon 



THE DISTRIBUTION OF WEALTH. 311 

as at any given moment a predetermined amount. More than 
that amount, it is assumed, the wages-receiving class can not 
divide among them; that amount, and no less, they can not 
but obtain." 

As the wage-fund is claimed to be, at any given time, a fixed 
amount, these economists assume that the wages, at such time, 
will depend upon the number of laborers among whom this 
wage-fund is to be divided. General Walker has sufficiently 
answered the wage-fund theory by showing that wages are 
paid from production and not wholly from capital ; and that 
wages will vary with changes in the facilities of production, 
even if capital varies in the other direction. But the wage- 
fund theory fails from a disagreement among its advocates 
as to what the fund is made up of, and from the obvious 
fact that if such a fund can be conceived as theoretically 
existing, it can not, at any given moment, be determined, 
and can not, therefore, influence the demands of laborers and 
employers, who act without any possible knowledge of its 
amount. 

290. The wage limits. — Wages evidently fluctuate be- 
tween two extreme limits, beyond which they can not per- 
manently pass, though they may overstep these limits, in 
particular cases, for short periods of time. 

The lowest limit, the limit of least wages, is that below 
which the laboring population can not continue to exist and 
keep its numbers good. This limit will evidently differ with 
different races and in different climates. This limit might, 
evidently, be overpassed for a time, but the perishing of a 
part of the laboring population would diminish the labor sup- 
ply and raise the wages again to a living rate. Ricardo held 
that wages are always tending towards this minimum; and 
Turgot held that, in the long run, wages would always settle 
at the living point. 

The highest limit, the limit of greatest wages, is that beyond 
which goods can not be produced without loss. Evidently, 



312 POLITICAL ECONOMY. 

no one will continue long to employ labor when the products 
will not pay the cost of production. The excitement of com- 
petition and speculation may, for a time, crowd wages above 
this point, but they can not remain there. 

Between these limits there will be incessant fluctuations, 
and the free movement of labor, especially among intelligent 
populations, will tend to prevent either extreme from being 
exceeded or even reached. 

291. The share of capital. — Two theories. — Capital 
has already been shown to be an instrument of production. 
As materials, or tools, or supplies, it enters into all produc- 
tion, and hence, justly, claims a share of the products. 

Capital may be used by its owner; or its use may be sold 
to another. In this it precisely resembles labor; and the same 
two theories of distribution which apply to the wages of labor, 
will be found to apply to the interest of capital. The owner 
of capital may use it himself, with his own or with hired 
labor, and take as his own whatever his capital shall pro- 
duce; or he may offer his capital in market, to be loaned for 
the current rate of interest, and receive this interest in place 
of his share of the products. The purchaser or hirer of the 
capital assumes all risk of its employment, pays the price 
agreed on, and takes the net proceeds as his own profits. 

Capital differs, however, from labor in several important 
particulars : 

1. It may increase much more rapidly than population, and 
consequendy more rapidly than is possible for labor to increase. 

2. Its demands have no life limit below which it can not 
continue to exist. The rate of interest may fall to mere cost 
of safe keeping without impairing the integrity of capital. 

3. Capital, though ceasing to be capital, remains wealth, 
and may still serve to support its owner till it is wholly spent 
or consumed. The life standing behind labor must be nour- 
ished by something else than the mere laboring power, while 
this remains idle. The Hfe standing behind capital may feed 



THE DISTRIBUTION OF WEALTH. 313 

upon the capital itself while the capital endures, and this may 
be for years. In any contest of endurance between capital 
and labor, capital has this advantage. 

4. Labor has this advantage that it can do something with- 
out capital; it can, at least, collect the free fruits of nature. 
Capital, without labor to use it^ can do nothing. Hence, in 
the long run, labor increases in power, while capital dimin- 
ishes relatively. Labor represents man; but capital represents 
only things. In the struggle for existence, man rises and 
things fall. The rate of interest has steadily dechned, in the 
best cases of modern civilization — among the leading industrial 
peoples; and the wages of labor have as steadily risen. These 
facts are full of significance; and they are all the more sig- 
nificant because directly opposed to the theories of the old 
economists, Hke Ricardo and Turgot. 

292. The rent share. — As has been shown, lands and 
buildings aid in the production of values, and must, therefore, 
share in the primary distribution of the products. This share 
is usually called rent. 

In manufacturing and commercial industries, lands are com- 
monly useful only as sites, or spaces where the operations can 
be carried on. They are to be counted as a part of the plant, 
and as one of the forms of capital; and, as such, the law of 
distribution is the same as that shown for other capital, mod- 
ified, indeed, by the durabihty of the lands. The same two 
theories prevail, by one of which the rent is a share of 
products, while by the other it is the price of the use of 
lands. 

In agricultural industries, the soil is an important agent of 
production, and must be counted partly as nature's gift and 
partly as a machine prepared and put in operation by the 
skill and labor of man. No important difference in principle 
can be found between this and any other machine constructed 
by man, though it differs largely from other machines in mag- 
nitude and fixity. A good farm, like a loom, is made from 
P. E.--27. 



314 POLITICAL ECONOMY, 

nature's materials, by the application of labor aided by tools; 
it can only be used by labor and skill; it wears out in use, 
and needs constant renewal and repairs. It is only a machine 
of more varied production than the loom. The law of rent 
would seem, therefore, to be not necessarily different from that 
of the interest or rent paid for the use of the loom. 

In many parts of the United States, farms are rented for a 
fixed share of the crops, commonly one third. Under the 
*' metayer" system, prevalent in Italy and France, a share 
of the products, amounting commonly to one half, is paid as 
rent for the land and stock. All of these systems presuppose 
a laboring and a land-holding class; or, in other terms, the 
land is furnished by one party and the labor by another. 
Under the cottier system, in Ireland, a money rent is paid, 
only indirectly based upon the products of the land. The 
cottiers bid for the use of the land, and the rent they can 
pay is limited only by the surplus they can produce beyond 
the meager support of their own families. The farming sys- 
tem of England also is that of a money rent, fixed for a 
number of years by the lease given by the land-holder. 
Money rents are also common in the United States, and are 
always regarded as given for the use of the land. 

Rent, like wages, has two extreme limits, beyond which it 
can not pass permanently. The highest limit is that beyond 
which the surplus of products, after paying the rent, will not 
support the labor. This is upon the supposition that the land 
is cultivated for its products, and that the laborer has no 
other means of support. Land used for a home, for pleasure, 
or for other purposes, may bear any rent whatever which the 
means of the occupant will allow. But land cultivated for 
profit must, evidently, pay its cultivator to the extent that he 
may keep working, or it will be abandoned. 

The lowest limit of rent is that below which the land can 
not be kept in a productive condition. This is upon the sup- 
position that the improvements and betterments — the fencing, 



THE DISTRIBUTION OF WEALTH. 315 

the fertility, and the necessary buildings or other structures — 
are paid for out of the rent. These constitute, as we have 
seen, the real capital in farming lands, and when these disap- 
pear the land relapses to a state of nature. The occupant 
of the land may agree to keep the land in good condition. 
In this case his care of the land is part of the rent he pays. 
If he receives the use of the land on the simple terms that 
he keep it in condition, then the whole rent may be counted 
as absorbed in the preservation of the owner's capital. When 
the occupant is no longer willing to take the needful care of 
the property for its use, the land lapses into the valueless 
natural state, and no longer yields returns sufficient to support 
the labor. 

293. The Ricardo Rent Theory. — The celebrated Ricardo 
theory of rent, propounded first by a Dr. Anderson, at the 
end of the last century, and advocated, in this century, by 
Mr. Ricardo, Mr. Malthus, and Sir E. West, has been ac- 
cepted by J. S. Mill and many other English and some 
American economists. It is expressed by Mill in these terms : 
"The rent which any land will yield is the excess of its pro- 
duce, beyond what would be returned to the same capital if 
employed on the worst land in cultivation. This is not, and 
never was, pretended to be the limit of metayer rents, or of 
cottier rents; but it is the limit of farmers' rents. No land 
rented to a capitalist farmer will permanently yield more than 
this; and when it yields less, it is because the landlord fore- 
goes a part of what, if he choose, he might obtain." It is 
elsewhere stated, by the advocates of this theory, that when, 
the best land alone needs to be occupied, it will pay no rent. 
When the next grade of land comes into use, the best will 
pay rent equal to the excess of its products over those of the 
second grade; and so on, as third and fourth grade lands 
come into necessary use. The theory may be illustrated by 
the following diagram, in which each line represents a suc- 
cessive grade of land, and the lengths of the lines represent 



3i6 



POLITICAL ECONOMY. 



the degree of fertility, or producing power under a common 
cultivation. As A, the secant line of cultivation, moves from 
right to left, it successively reaches the lower grades of land; 
and the amount of products it cuts off on the left, on each 
Hne, represents the rents to be paid by the land next above. 



D 



B 



1st grade. 
2d grade. 
3d grade. 
4th grade. 
5th grade. 



At A, the first grade land bears no rent; at B, it bears 
the rent AB; at C, it bears the rent AC; and at D, it 
bears the rent AD. At B, the second grade bears no rent*; 
at C, it bears the rent BC; at D, it bears the rent BD. At 
C, the third grade bears no rent; at D, it bears the rent CD. 
As soon, in any case, as the line of cultivation reaches a 
lower grade of land, the grade of land above it begins to 
bear rent, for the reason given by J. S. Mill in the passage 
quoted. He assumes that what the poorest land in cultivation 
will yield is only ^'the ordinary profit of capital," and that 
all income above this ordinary profit of capital will be de- 
manded by the landlord and freely paid by the tenant for the 
rent of the land. 

It will be seen that this is really a law for the estimation 
of rent, rather than the reason for rent itself, though it has 
sometimes been put forth as such. The real reason for all 
sharing in the primary distribution of products, as already 
sufficiently shown, is in the producing power of the sharer. 



THE DISTRIBUTION OF WEALTH, 317 

Evidently, if the products could be secured without the use 
of the land, no one would consent that the land should take 
a share of the products under the name of rent or under any 
other name. 

As a rule for the estimating of rent, the Ricardo theory 
may have some value, and especially in a land like England, 
in which the land is almost wholly held by one class and 
cultivated by another. But it ignores the almost wholly arti- 
ficial character of fertility and the new and higher agencies of 
cultivation, which become available as soon as the demand 
for intense cultivation arises. It does not seem to add any 
thing to the evident principles stated in the preceding section. 

294. The profit share. — An industry may be counted 
successful in which the products pay fully all wages and sal- 
aries, the interest on all capital emjoloyed, and the rents, in- 
cluding all wear and tear, of property used. But it is ex- 
pected that a prosperous business will do more than this; that 
it will produce a surplus or profit. But as all contributors to 
the work of production have received their respective shares 
of the products resulting from their common efforts, to whom 
does this surplus of profit belong? We have supposed, in 
this case, that all labor, including that of management, has 
been paid for at the stipulated price; that the capital has been 
replaced with its agreed interest, and that whatever was rented 
has been returned with the proper rent, as stipulated. It is 
evident that the profit belongs to the parties, whoever they 
may be, who undertook the enterprise and accepted the risks 
of it. These may be stockholders, or the capitalists, or the 
whole body of persons engaged in the work. It is this pos- 
sible surplus, or profit, which induces the planning and carry- 
ing forward of business enterprises, and compensates for the 
risks undertaken. 

Profits have been defined, by J. S. Mill and others, as in- 
cluding the interest on capital, the pay for superintendence and 
management, and the compensation for risk; but it is evident 



3i8 POLITICAL ECONOMY, 

that, strictly used, the term profit should include only the 
last of these. The four elements, labor, capital, management, 
and risk, may, evidently, each be furnished by separate parties, 
as in the case of the great corporations which borrow much of 
their capital, employ salaried superintendents, hire the labor, 
and themselves assume the risk. In the case of the business 
man or the partners of a firm, who plan and manage their 
business, furnish the capital, and hire the labor, doubtless the 
management and capital share the risk and take the profit, 
which then may be considered as covering interest, manage- 
ment, and risk. If the laborers should also unite in the enter- 
prise as partners in its risks, putting their wages at risk along 
with the capital invested, then all parties would share the 
profits, which, in this case, might be said to include wages, 
interest, management, and risk. 

Large risks demand large profits. No wise man would 
assume great risks without the chance of making such profits 
as would cover large losses, in the long run, and still leave a 
profit. Profit shares in the products of any business in propor- 
tion to the risks run. It was shown, in a preceding chapter, 
that risks imply possible losses, or a certain proportion of act- 
ual losses in a long series of similar enterprises. As the suc- 
cessful ventures must be counted on to cover the losses, each 
successful venture should produce, in its profits, its share of 
the coming loss. 

These four, then — wages, interest, rent, and profit — com- 
plete the primary distribution of products, and share between 
them the whole of each new value added to the world's wealth. 



CHAPTER XXVI. 

SECONDARY DISTRIBUTIONS OF WEALTH. 

295. For consumption and saving. — Wealth having 
reached the hands that created it — having undergone the pri- 
mary distribution to laborers, capitalists, and business man- 
agers — does not rest there; it begins imrpediately another 
movement of secondary distributions. By an innumerable 
series of exchanges, the values created are converted into the 
various articles desired by the several parties. 

The laws of the secondary distributions are found partly in 
the natural desires of men, and partly in their surroundings. 

The chief division which takes place in the secondary distri- 
bution, is into the part to be consumed and the part to be 
saved. Only among the thoughtful and provident is this 
division made at the outset, and intelligently; in most cases it 
is governed by accident, and seems to depend upon chance. 
Still, it occurs with a certain regularity, and in a definite pro- 
portion, when large populations are taken into view. It has 
been computed that ninety-five per cent of the annual produc- 
tion of wealth in the United States, is consumed within the 
year in the current support of the population. 

296. Classes of consumption. — The wealth consumed 
may be counted as chiefly carried forward into new produc- 
tion. It may be coarsely subdivided into the following classes 
of expenditures : 

I. The satisfaction of the vital wants, including food, cloth- 
ing, housing, and care. These expenditures support life, 

(319) 



320 POLITICAL ECONOMY. 

renew strength, and go to make up the labor-power for the 
year. It keeps good that great vohime of uncounted capital 
which lies in the muscular and mental force of the active, 
laboring population; and, in the case of a growing people, it 
adds to that capital. Only when expended in the support of 
the dependent classes, including the idle and the unfortunate, 
may it be counted as lost. 

2. Expenditures for personal pleasures, such as are inno- 
cent, if not also elevating, in character, including fine dress 
and equipage, ornament of the person or house, social enter- 
tainments and feasts, pleasure excursions, sight-seeing, and 
shows. These, though often wasteful and excessive, if wisely 
used, may improve health, stimulate higher tastes and activity, 
and open new fields of industry for large classes of laborers. 
They increase the desire and power to labor, and only entail 
loss when carried to excess. Luxuries, doubtless, consume > 
and destroy large masses of goods; but all luxury is not loss. 
It often stimulates the production which it consumes, and in- 
duces industry which would not otherwise be exerted. Even 
savages are sometimes made industrious to obtain the luxuries 
offered them by their civilized neighbors. 

Take, for example, a single article of luxury. The silk 
manufactures imported into this country, in the year ending 
June 30, 1881, amounted to $32,377,226.48. The duties 
paid on these goods raised the cost to more than $50,000,000. 
The home production probably nearly doubled this amount. 
In 1874, the 180 silk mianufactories of the United States em- 
ployed 141,479 operatives of both sexes, and produced over 
$20,000,000 worth of silk goods. Were these silks, satins, 
and velvets, worn by American women, a mere waste of lux- 
ury; or did the industries stimulated by it make up for the 
expenditure of these millions, and leave the country as rich 
as it would have been had all this silk never existed? The 
equal steps, by which the refinements of life and the wealth 
producing industries have gone forward together, amount 



SECONDARY DISTRIBUTIONS OF WEAITH. 321 

almost to proof that these luxuries have in some way increased 
rather than diminished the world's wealth. Cases of extrava- 
gance and loss may easily be found, without doubt, but 
the economist is concerned only with the grand totality of 
outcome. 

3. Expenditures for personal and public improvement. 
These include the sums paid for good government, for educa- 
tion and books, for churches, libraries, museums, galleries, 
lectures, and the whole round of esthetic, literary, and scien- 
tific work. These expenditures entail no loss, but, on the 
contrary, they enter into the mass of existing goods as a new 
element of value. They enlarge the value of wealth by en- 
larging its uses, by increasing the demand for it, and by 
giving to it greater safety and higher powers. 

297. The economic maelstrom. — Expenditures for harm- 
ful and vicious pleasures are almost wholly a loss of property, 
being both a destruction of the values consumed, and a dete- 
rioration of the powers of production. Among the most public 
and conspicuous of these expenditures are to be noted those 
for intoxicating drinks, for opium, and for tobacco. No more 
serious drain upon the world's wealth exists than is to be 
found in the use of these substances. 

Taking the total consumption of spirituous liquors, wines, 
beer, etc., as given in the quarterly report (No. i, 1881-1882) 
of the bureau of statistics, and deducting spirits used in the 
arts, the remainder, at the common retail prices, would show 
an expenditure, in the United States, for the year closing 
June 30, 1 88 1, of over $500,000,000 for intoxicating drinks. 
Some estimate it much higher than this, and count that it can 
not fall short of $1,000,000,000. As an absolute destruction, 
this would be an enormous loss to the land: but it carries 
with it loss of time, of health, of morals, and of life itself, 
that make it of frightful consequence. 

The consumption of tobacco, though less enormous in 
amount, and less injurious to morals and health, must still 



32 2 POLITICAL ECONOMY. 

• 
be classed among the harmful and useless expenditures. 
Over 147,000,000 pounds of tobacco, mcludmg more than 
3,250,000,000 cigars and cigarettes, were taxed for consump- 
tion in the United States in the year ending June 30, 1881; 
and to this amount must be added over $10,000,000 worth, 
including cost and duties, of imported tobacco. The cost to 
consumers probably exceeded $250,000,000. Thus, into the 
smoky air and into the spittoons went a sum more than three 
times as large as the entire annual expenditure for the pay- 
ment of the 272,000 teachers, and the education of the 
15,000,000 school children, in the pubHc schools of the 
United States. 

Add to these items of spirits and tobacco, the millions con- 
sumed in opium and in the nameless vices, with the millions 
lost utterly in fires and floods, and we have before us that 
economic maelstrom into which goes as into utter perdition, 
more than one tenth of the entire annual production of wealth, 
leaving behind only the weakness, the stain, and the brood- 
ing discontents which threaten both society and the industries 
with riots and overthrow. 

298. The savings. — The other great stream of secondary 
distributions of wealth goes into the channels of savings and 
investments. These savings will seem, at first but the frag- 
ments gathered up after humanity's feasts; but out of these 
grow that mighty mass of accumulated values which greets 
the eyes and fills the balance sheets of the world's gathered 
wealth. The enormous cumulations of riches which deck the 
great globe in myriad forms of magnificence and splendor, — 
of comforts, luxuries, and solid values, — all these, it should be 
remembered, represent the results of savings. Traced from 
its beginnings, in the far away springs and rivulets of past 
industries, all capital is, at the outset, a saving. It is the 
part of his product which the first laborer saves from his con- 
sumption, which becomes capital in his hand. The savings 
of the first day unite with the savings of subsequent days, 



SECONDARY DISTRIBUTIONS OF WE AIT H. 323 

and, multiplying the power of production, increase the oppor- 
tunity of saying till the accumulated savings of the generations 
stand before us in the gigantic masses of wealth which excite 
the cupidity and, too frequently, also, the discontents of the 
beholders. 

299. Laws of investment. — Savings naturally seek invest- 
ment. Only in the earHer and less settled states of society 
are men disposed to hoard and hide their savings in order to 
keep them safe from the prevalent robbery and outrage. 
When industry feels safe in the possession of its earnings or 
products, it naturally seeks to gain a profit from its little 
wealth. Men wish to secure the advantages which may come 
from the employment or investment of their savings. 

Two laws govern all investments, whether put into trade or 
into property. The first is the law of safety; the second is 
the law of profit. These two control all investment as gravi- 
tation controls the flow of rivers. They determine whether 
the spare dollar shall go to the hidden hoard, in which safe 
keeping alone is sought; or to the savings bank, where it is 
hoped to find equal safety and some profit beside; or to 
active trade, where more of risk is met, it is true, but where, 
also, more tempting profits offer themselves. 

Safety and profit may be counted as counter-balancing 
forces in their influence upon investments. They stand always 
to each other in an inverse ratio. When an investment prom- 
ises high safety, it promises but small profits; when the profits 
are high, the safety is small. The reason is sufficiently obvi- 
ous. Where safety and profit are both small, no one cares 
to invest. The small returns would not repay the great risks, 
which mean, also, great possible losses. Where safety and 
profits are both high, the rush of investments will soon bring 
down the profits. 

Agricultural property is known to have great security. Land 
can not be easily lost or destroyed ; but landed property yields 
only low profits. Were agricultural investments as profitable 



324 POLITICAL ECONOMY. 

as they are safe, the movement of capital in that direction 
would soon raise the price of lands to a point which would 
again make their profits to stand in the inverse ratio of their 
safety. 

Manufacturing capital ordinarily yields greater profits than 
agricultural, but with less security; and commercial capital, in 
general, the highest in profits, is also the highest in risks. 

Investments are influenced by the business experience of 
the investor, and also by the social and other advantages 
promised by the investment ; but the laws of safety and profit 
will, in the long run, be found to be the chief controHing 
forces in directing the flow of investments in one direction or 
another. 

In times of business depression, investments consult safety; 
capital is then said to be timid. But in times of great pros- 
perity, and especially when the spirit of speculation is aroused, 
profit becomes the ruling motive, and capital becomes venture- 
some and bold. In the days of ''Law's Mississippi Scheme," 
and of "The South Sea Bubble," all classes rushed eagerly 
to invest their accumulations in the most hazardous enterprises, 
tempted by the enormous profits promised. Similar periods 
have occurred in our own country — in the time of the wild 
land speculations of 1836, and in the railroad speculations 
between the close of the war and the panic of 1873. 

300. Territorial distribution of wealth. — Besides the 
movements of savings to the various forms of investment, 
there is a territorial movement, slower in its action, but not 
less certain in its results, which carries the larger masses 
of wealth, in one direction or another, across larger spaces 
of territory, and usually towards given centers of accumulation. 

Thus, in the United States, there has been a constant flow 
of wealth carried with the immigration into the West. A care- 
ful estimate would, probably, show that the wealth of the 
West, for the years before its products became in excess of 
its consumption, was imported wealth. Even the value which 



SECONDARY DISTRIBUTIONS OF WE A IT H. 325 

was thought to exist in its lands was but the reflected shining 
of the imported capital. But from the moment that its surplus 
of products began to flow eastward to pay interest, and to 
purchase goods, western wealth moved, by a strong but certain 
under-current, to the eastern manufacturing centers and to the 
seaboard cities. 

301. Flow of wealth to cities. — A second form of terri- 
torial movement is that which steadily carries the wealth of the 
country into the cities. This movement is accompHshed partly 
by the removal of population from the country places into the 
towns, but chiefly by the movements of trade, the products of 
the rural districts going to the cities for distribution, and leav- 
ing there large amounts of values in the form of profits on trade. 

At the present moment, another and more powerful cause 
is at work to carry the wealth of the country into the cities. 
The cities have become the great seats of manufacture. The 
cheapening of steam-power has caused the banks of the streams 
to be deserted, and has left the water-falls to pour their floods 
in solitude and idleness. Manufacture finds the city a more 
convenient and more profitable home. At these great centers 
of traffic and population, the materials can be more easily gath- 
ered, the laboring forces can be more readily summoned and 
supported, and the sale and distribution of products can be 
effected with more ease and speed. 

302. City growths. — Thus, the cities have become wealth- 
producing, and the enlargement of population, by the new 
manufacturing hosts, increases at the same time the trade, 
power, and profits of these great hiving places of civiHzed life. 

No feature of modern life and economic movement is more 
characteristic or important than this of city growth. If we 
assume, as we may, that this strong tendency of populations 
to the cities has developed itself chiefly within the last four 
decades, the figures given us in the last census will be found 
instructive. In 1840, the number of cities in the United 
States with a population of 8,000 and upwards, was 44; in 



326 POLITICAL ECONOMY, 

1880, there were 286. Of the larger cities, in which the 
manufacturing movement is more characteristic, in 1840, there 
were six having over 40,000 population; in 1880. there were 
45 such cities in the union. In 1840, 8.5 per cent of the 
entire population was found in the cities; in 1880, the pro- 
portion was 22.5 per cent, showing that the city popula- 
tions increased two and a half times as fast as the entire 
population. It will be also found that the wealth and man- 
ufacture of the cities has increased in nearly the same ratio. 

There is a counter current of wealth flowing from the city 
to the rural districts, seeking safe investment for the surplus 
of wealth. This movement has been especially conspicuous 
in England, where the overflow of city wealth has been stead- 
ily buying up the lands of England till these lands have 
largely passed into the hands of wealthy land-holders. So, 
also, around all the great American cities, there is an ever- 
widening belt of suburban setdements made up of the country 
homes of the wealthy classes of the cities. 

303. International distribution of wealth. — The final 
flow of wealth is from the less favored countries to those more 
favored. The internadonal movement of wealth is by two 
channels: i. By migration, and 2. By trade. 

The immigration from Europe to America has brought with 
it large, though unseen, sums of wealth in goods and money. 
But the chief importation has been the labor power brought 
by these immigrants. It is uncounted wealth, but it is none 
the less real or valuable, because not enumerated in the 
census as property. The rapid development of the resources 
of this country would have been impossible but for the im- 
ported labor-power which has come to us in the voluntary 
immigration from the old world. 

The large and increasing stream of American travel to 
Europe doubtless carries large amounts of wealth in the other 
direction. Ten thousand tourists, spending an average of 
$i,ooo each, will leave in Europe $10,000,000 of American 



SECONDARY DISTRIBUTIONS OF WEALTH. 327 

capital; and it is claimed that as many as this have sometimes 
visited Europe in a single season. 

But the chief agency of the international movement of 
wealth is to be found in the international commerce. As all 
trade between the people of different countries is an exchange 
of values, it may appear, at first sight, that the outflow of 
wealth from any country, by the channels of trade, must 
equal the inflow; but a more careful estimate will show that 
some countries, by necessities of character and position, are 
tributary to others, just as the rural districts are tributary to 
the cities. Peoples using chiefly unskilled labor, and produc- 
ing coarse goods, pay tribute to more skillful populations. 

The grand aggregate of the foreign trade of the United 
States, in the fiscal year 1881, was $1,545,041,974, made 
up as follows: 

Exports of merchandise, . . $902,377,346 
Imports of foreign merchandise, 642,664,628 



Excess of exports over imports, $259,712,718 

This excess must be paid to us sooner or later in gold, 
silver, or bonds. The balance of trade and its meaning have 
already been discussed in a preceding chapter. The ques- 
tion now is to determine in which direction the real flow 
of wealth is taking place. All foreign trade may be divided, 
in general, into two great classes : i . That with nations from 
whom we receive more goods than we send; 2. That with 
nations to whom we send more goods than we receive from 
them. To the first class belong the South American coun- 
tries, and, in general, the peoples of lower industrial con- 
dition and civilization than our own ; to the second belong 
Great Britain, France, Belgium, and most of the European 
peoples. 

During the fiscal year 1881, our trade with the South 
American states was as follows: 



328 POLITICAL ECONOMY. 

Imports of merchandise and specie $81,501,718 

Exports of merchandise and specie 25,871,953 

Excess of merchandise and specie received by us, $55,629,765 

During the same year, our trade with Great Britain was 
as follows : 

Exports, including merchandise and specie, $491,260,473 
Imports, including merchandise and specie, 217,838,629 

Excess of exports to Great Britain . , . $273,421,844 

The excess due from us to the South American states was 
paid chiefly by drafts on England, drawn against the balance 
due us on our trade with the latter country; so that our 
purchases from South America were paid partly by our direct 
sales to the South American states and partly out of our sales 
to England. 

The goods purchased from South America were chiefly raw 
materials for our manufactures, and partly agricultural prod- 
ucts, such as coffee, quinine, etc. These raw materials were, 
to us, a source of further wealth, and were imported, there- 
fore," at a profit. Our sales to the South Americans were 
chiefly manufactured goods, on which we also made a large 
profit. Thus, while we apparently fell in debt to those states, 
we probably found a larger profit from the trade than they 
did. To us it was a source of further wealth; to them it was 
a means of supply of necessaries for consumption. 

Our importations from England were largely of manufact- 
ured goods, which were a source of larger profit to England 
than to us. Our exports were also in large part manufactured 
goods, on which the profit was ours, though we also sent 
large quantities of cotton, grain, and meats. 

In general, whatever may be the apparent course of trade, 
the flow of wealth will be found to be from the poorer and 
less civiHzed peoples to the richer and more civilized — from 
those of rude and simple arts to those of higher and more 



SECONDARY DISTRIBUTIONS OF WEALTH. 329 

complicated industries. This movement may be slow and 
small in amount, but the laws of commerce and of civiUzation 
alike determine its direction. Among nations, as among men, 
the ignorant and improvident serve the intelligent. Wealth 
flows to the most advanced and most progressive populations. 

304. Transformations of wealth. — There remains still 
another set of phenomena to be studied in the history and 
final destiny of wealth. 

All material things undergo changes. They are in a pro- 
cess of perpetual decay and dissolution on the one hand, and 
of perpetual growths or renewals on the other. The materi- 
als of which wealth is made can not be saved from the 
forces of decay. From the moment our fabrics are finished, 
they begin to yield to the destroying powers of nature. 

From the hour of its creation, wealth begins then to un- 
dergo changes or transformations. Some of these transforma- 
tions are destructive, and others are constructive or productive. 

We have already seen that, in the creation of new values, 
something of old values must ordinarily be destroyed. We 
have also seen that under many of the forms of consumption, 
we have only a transmutation of one form of value into an- 
other. The values used up in the feeding of laborers are 
turned into new labor j^wer. The wearing machinery is 
constantly projecting its values into the fabrics it is helping 
to produce. The forms of wealth are changed, in these 
cases, but its energies and values are conserved. All of 
these may be styled constructive transformations. They add 
to, rather than take from, the sum total of man's wealth. 

The destructive transformations are of two classes: those 
which occur by the unintentional action of natural agents; 
and those which come from the action of mankind. 

The destructive agencies of nature include the chemical 

forces which are found in the air, the water, the heat and 

cold, and the various chemic laws and agencies which rust, 

rot, desiccate, and destroy the structure and integrity of the 

p. E-— 28. 



330 POLITICAL ECONOMY. 

substances which they attack. They include, also, those vital 
agencies of infusorial and microscopic life which seem to per- 
vade all things with their spores or germs, and are ever ready 
to set actively to work on all substantive or material things. 
To these we may add the predaceous animals and noxious 
plants, and even the destructive agency of evil men. All of 
these are embraced in that warning against the short-lived 
treasurers of earth, ' ' where moth and rust doth corrupt, and 
where thieves break through and steal." The silent destructive 
agencies of nature are perpetually working against the prod- 
ucts of human labor; and, if not stayed by the hand of con- 
stant care and repair, would, in a score of years, destroy 
nearly the whole accumulation of the world's wealth, and turn 
the fairest fabrics of human skill into melancholy ruins. It is 
by the unseen hand of this silent wasting force that a large 
part of wealth comes to its end. 

305. How progress destroys. — There is a rapid destruc- 
tion of wealth, brought on by man himself, not in the ordinary 
course of consumption, but by the changes made without 
intention to destroy. The changes of fashion annually strike 
from the world's balance-sheet enormous masses of value. 
The improvements made in machinery consign thousands of 
dollars worth of old machines to the heaps of old iron. The 
changes in the styles of building, or of furniture and equipage, 
send down the values of the older houses and furniture. A 
change in the route of a railroad, the position of a market, 
or of the business from a street, works destruction to values 
once recognized as valid and great. The invention of the 
steamship sunk, as if in the depths of the sea, the values of 
the old packet-ships which carried the passengers on their 
ocean voyage. 

There is still another mode of destroying property which is 
sometimes met. It is in the destruction of the moral or 
social character of a neighborhood. The presence of a liquor 
saloon, a gambling hell, a house of infamy, or of any brutal 



SECONDARY DISTRIBUTIONS OF WEALTH. 331 

and degrading establishment, will strike from the value of 
property around it, half its worth. The change in the char- 
acter of the government from a higher to a lower plane, the 
incoming of a rabble of ignorant and vicious people, the 
growth of public vice and lawlessness, are as destructive to 
values as is fire or flood. 

306. From matter to mind. — The last thought in prac- 
tical economics, touches that possible transformation of wealth, 
which transmutes it from material and destructible forms into 
spiritual and indestructible riches. Through the laboratories 
of science and the mindcraft of great scholars, aided by the 
appliances which wealth alone can gain, humanity has stored 
up a treasury of knowledge and a mastery of forces which 
could replace in a few months the wealth of the world, should 
it all be swept away in one mighty conflagration. 

And the advance of economic science and economic power 
has not yet reached its end. In the great store-house of nat- 
ure, lie facts as grand and truths as fruitful as any already 
discovered. The world of matter is as yet only half subdued 
to the service of man. On the pathway which leads from 
savagery to the highest civilization, it is probable that we are 
advanced less than half the way. The understanding of eco- 
nomic truths and the mastery of economic organization must 
go on with accelerated steps, and with accumulating power, 
in the future as in the past, till the ministry of nature to the 
wants and progress of mankind shall be more rational, more 
abundant, and more sure. 

The transmutations of wealth into mind-power, into intel- 
ligence, into truths discovered and into arts perfected, can 
not cease. The great economic circle of the industries which 
began with the impelling wants of mankind, must end where 
it began, and by all its accumulated power of work, and its 
accumulated mass of wealth, must push the- human wants 
steadily into higher ground of more intellectual, more moral, 
more perfectly human and divine, needs and aspirations. As 



332 POLITICAL ECONOMY. 

man appears forever rising above the summit of his highest 
achievements, so the last and noblest transformations of wealth 
must be into a healthier, stronger, and purer manhood, a 
happier humanity — into nobler forms of society, and a diviner 
life for man. Economic Science will justify its claim to our 
study, when it shall thus demonstrate its tendency and power 
to lift society and humanity to higher levels. 



NATIONAL ECONOMY. 



CHAPTER I. 

THE NATION AND ITS ECONOMICS. 

I. A nation is not simply a crowd — a mere mass of human 
beings assembled upon the same territory. A nation is a 
body corporate — an organic whole, composed of mutually de- 
pendent and closely related parts. Herbert Spencer assumes 
society to be a Hving organism, and traces the analogies 
between it and the highly organized animal forms. The nation 
low in rank, like the animal of low structure, has but few 
organs. The lowest type of animal is ' ' all stomach, all re- 
spiratory surface, all limb." So the nation, in its rudimentay 
state, is "all warrior, all hut-builder, all hunter." In the 
more perfect animal, there is a division of labor among the 
parts; each need of the body has its own organ, which serves 
alone that purpose of the body. It has a special organ for 
each sense — a stomach for digestion, a nervous system for sen- 
sation, limbs for locomotion, a heart for circulation, and lungs 
for respiration. So, in a highly organized nation or society, 
a complete division of labor and function takes place. 

Fourier, the great French social philosopher, also counted 

society a living organism, and compared its growth to the 

growth of the Hving man. He went further, and presented 

(333) 



334 POLITICAL ECONOMY. 

an analysis of the passional forces that produce this growth, 
and proposed a scheme of social organization which should 
give full force and effect to all the passional attractions that 
control the several functions of society as an organized whole. 

Without accepting, in full, either the idea of Spencer or of 
Fourier, we must recognize a large measure of truth in both. 
The nation is in a certain large sense a unit. It is united 
by many common ties, external and internal. A common 
territory, a common climate, common rivers, highways, cities, 
and markets, act as incessant though silent forces to produce 
community of characteristics, interests, and ideas. A com- 
mon government, common laws, common systems of educa- 
cation, common institutions of religion, charity, learning, and 
art, a common literature, and finally, a common name, his- 
tory, and flag, give to the nation a community of feeling, 
functions, and powers akin to that which binds the several 
members and organs of the human body into organic unity. 

2. The family of nations. — The individual nation is only 
one in a great family of nations; or rather, as a living organ- 
ism it stands confronting other similar organisms, sometimes 
with common, and sometimes opposing interests. These na- 
tions differ in size, situation, resources, interests, ideas, and 
civilization. They differ also in political, social, and indus- 
trial character and power. History is chiefly made up of the 
record of the rivalries of nations, and of their perpetual strug- 
gles for their selfish interests and supremacy. 

In the presence of this powerful and august assembly of 
national units, each nation is called upon to play its separate 
part, defend its individual integrity and rights, and achieve, 
as best it may, its individual destiny. In the mighty strug- 
gle for existence, each nation is to be treated as a whole. 
The individual citizen is not recognized except as a member 
of the organism. His interests are but a- part of the general 
interest; his life but a portion of the common life, in which 
each must be ready to suffer for all, and all for each. 



THE NATION. 335 

3. National economics. — In this high and true view of 
the nation,' and of its relationship to other nations, all indus- 
tries are seen to possess a national aspect and importance, 
and all wealth is in the last resort a national resource. In 
the nation's life, work-power and wealth are prominent factors. 
There is, then, a national side to economic science; or, as 
it may be stated with equal truth, there is an economic seg- 
ment in national politics. 

As shown in chapter second of our first part, national 
economy is an application of economic science, rather than a 
distinct chapter of that science. Its problems involve all the 
principles of pure economic science, but they also involve 
principles and factors of the national fife which must be taken 
into account in their solution. It is as idle and foolish to deny 
this special and distinct character to national economy as it 
would be to deny the economic feature in national polity. It 
may not be possible, always and in all cases, to distinguish 
between pure economics and national economy, since each 
juts into the other, as we shall see in the next sections; but 
the broad distinction between the two is easily discernible. 
Pure economics knows nothing of national lines or interests. 
National economy holds these as its foremost facts and 
aims. 

4. National work not economic. — Nations, as such, 
netther labor nor trade, in the common economic sense of 
these terms. Governments do indeed employ large numbers 
of people — officials, agents, clerks, laborers, soldiers, and sail- 
ors. They also construct roads, canals, harbors, and public 
buildings; they manufacture arms, munitions, and ships; print 
documents, bonds, bills, and blanks ; and conduct post-offices, 
telegraphs, and, in some cases, government railroads. They 
license, and thus control, certain forms of manufacture and 
traffic ; and sometimes, as in France, hold the monopoly of 
tobacco or of other special products and industries. Prisons 
and alms-houses are also under government control, and the 



336 POLITICAL ECONOMY, 

government either employs or hires to others the labor of the 
convicts and paupers. 

But with all this immense army of employees, the nation 
pursues no industry for the profits of it, or for the purpose 
of increasing wealth. The labor of its workmen, like that of 
its sailors and soldiers, is employed for general governmental 
uses and ends, but it is scarcely to be counted as a part of 
the world's wealth-producing industries, or as belonging to 
those phenomena which it is the business of the economist to 
study and explain. 

The subtraction of so large a mass of labor-power from the 
population, and the imposition of their support on the indus- 
trial efforts of the remainder, works, no doubt, a large if 
not violent disturbance of the economic conditions; but this 
disturbance is to be considered as a question of national 
economy rather than as a matter of pure economics. 

5. National property not economic. — Governments 
necessarily hold and use large amounts of property. The 
lands that serve as sites and reservations for civil or military 
purposes; the large and costly edifices employed as capitols, 
court-houses, palaces, prisons, asylums, hospitals, school-houses, 
public galleries and hbraries, arsenals, offices, stores, and 
shops, all these cost millions of treasure to erect and main- 
tain. The arms, munitions, and machinery, the costly furni- 
ture, books, pictures and scientific collections held by the 
nation are of enormous values; but they constitute no part of 
the supplies in the world's markets, and serve none of the 
purposes of common capital. They are part of the needful or 
desirable machinery of government, but they are not property 
in the ordinary economic sense. They have no place in those 
great aggregates of wealth which stimulate, sustain, and re- 
Avard the industrial efforts of mankind. 

It is true that the production of this mass of government 
property, and the abstraction of materials and products from 
the markets, must necessarily affect, for the time at least, the 



THE NATION. 337 

ruling prices for such goods and services, and the paying out 
of large sums from the public treasury must deflect more or less 
widely the currents of trade ; but these are only incidental ef- 
fects, and are not to be counted as among the ordinary forces 
of economic science. 

Thus, neither in the segment of work, nor in the segment 
of wealth, does the nation intrude as a proper competing fac-" 
tor; but the industrial Hfe and the political life of a people 
interlace in so many ways that a study of national progress 
and civiHzation can not be made complete without the study 
of national economy, or the wealth-side of the nation's Hfe. 

6. The nation a trustee. — The very existence of the na- 
tion, the gathering together into settled habitations of large 
populations, creates certain franchises and reflected values 
which belong to the people as a whole, and not to any one 
man more than to others. Of this character are the water- 
courses, the public lands, the forests, mines, and fisheries, 
which the presence of markets has, as explained in the 
former part of this work, made to become valuable. Among 
the valuable franchises created by the presence of society, 
may be enumerated the coining of money, the issuing of 
paper money, the transportation of mails, the opening of mar- 
kets, the provision of public highways, the supply of public 
light, and the importation of foreign goods. Over all these 
species of property and franchises, the government claims 
ownership in the name of the people which it represents. 

To this property, must be added all possessions to which 
private ownership has ceased by failure of heirs, and by for- 
feiture and confiscation. All waifs, treasure trove, lapsed es- 
tates, and franchises, go to swell this volume of common 
property of the whole people for whom the government stands 
as trustee. 

In its character as trustee, the government makes sales of 

public lands, forests, and mines, issues charters of franchises 

for the construction of railroads, for banks, and for the public 
p. E.— 29. 



338 POLITICAL ECONOMY. 

sale of commodities; provides post-offices and post-roads, and 
coins and issues money. The. exercise of the powers of this 
trust necessarily sways a powerful influence over the industrial 
interests and movements- of the people. They may often, in 
great commercial crises, work the well-being or wide-spread 
ruin of vast business interests. History has many such inter- 
ferences for good or evil to record. The timely redemption of 
bonds by the Secretary of the United States Treasury has often 
saved the money market of the country from disastrous press- 
ure and panics. The English and French governments have 
frequendy interposed their control over the money franchise, 
and, by a suspension of specie payments, saved the monetary 
system and credit of their respective countries from collapse. 

7. The nation the guardian of property. — There re- 
mains one other relation which unites the nation to the eco- 
nomic concerns of its people. All property rights rest for 
their enjoyment and security upon, the protection of the na- 
tion and its laws. Whatever natural right a man may claim 
over the products of his own skill and labor, it is evident 
that no man, unaided, can maintain his rights against the will 
of his fellow-men. The nation must, by law, consent to his 
rights, and protect him in their enjoyment, or his right of 
property would be an empty, if not a dangerous, claim. 

It is evident that this protection, as it costs the expenditure 
of valuable materials and forces, in the enactment and ad- 
ministration of laws, adds largely to the values of property; 
and these added values belong, not to the individual, but to 
the public, or nation, which created them. Society is thus, 
we repeat, a silent partner in every man's business. What 
he produces, society protects. 

8. The nation the paramount owner of all prop- 
erty. — There is a certain high and sacred sense in which the 
nation, as the all-comprehending organism, including and sus- 
taining all its many members, is the true and final owner of 
all property within its borders. Just as it may, in the hour 



THE NATION. 



339 



of peril, summon any of its citizens to stand up in its defense 
at the peril and sacrifice of his life; so it may also, in similar 
need, claim the use or sacrifice of property. As we have 
seen, it was anciently held that all right of property was cre- 
ated by law; that the nation granted property rights to private 
citizens. Though not all true, yet this view involved a cer- 
tain amount of indisputable truth. For all great national uses 
and defense, all property is national. In the failure of other 
heirs, the nation is the heir of all its people. 

It is in the exercise of this paramount ownership that the 
nation asserts the right of eminent domain, confiscates the 
property of criminals, and imposes its taxes upon the wealth 
or incomes of all its citizens. 

g. Synoptic view. — Wants, Work, and Wealth, the three 
great factors of economic science, if taken in their national 
meaning, will give us likewise the grand divisions of national 
economy. With their subdivisions, they afford the following 
synoptic view of the field of this science : 



National wants. 



National work. 



r Domestic. 



Foreign. 



r Public security. 
Public education and science. 

1 Public chanties, j Paupers. 
I *. Unfortunates. 

\ Public well-being. 

Commercial intercourse. 
Commercial protection. 
National honor and independence. 



Public defense. 
Public administration. 
Public improvements. 
Public enlightenment. 
International defense. 



National wealth. 



Property. 



Franchises 



Public lands and buildings. 
Public highways and waters. 
Public funds. 
Taxes and revenues. 

of coinage and banking. 

of trade and transportation. 

of patent-rights and copyrights 



It will be evident, on light examination, that all of the 



340 POLITICAL ECONOMY. 

topics here shown have an economic side — a property as well 
as a political element; and it is by reason of this economic 
feature alone they claim a place in national economy. As 
simple, social, or national concernments they could not prop- 
erly demand the attention of the economist. They are not 
all of equal interest and importance in their economic rela- 
tions, and some of them may seem to have only an indirect 
and remote relation to economic science. 

A full discussion of the entire field would demand a vol- 
ume. It is the purpose here to treat only of those topics 
that have been most commonly included in Political Economy, 
and which will therefore be asked after by readers as neces- 
sary to their view of the subject. We limit ourselves to some 
brief chapters on taxadon, and on protection or protective 
tariff. 



CHAPTER II 



TAXATION. 



lo. Taxes. — A tax is an enforced contribution of private 
property for a public use. As governments must exist, they 
must be supported; and as they produce nothing directly, 
they must be sustained out of the productions of the private 
citizenship. Government may be counted as one of the wants 
of mankind, and taxes as the price paid for it. 

The cost of good government varies with the extent of 
territory to be guarded, with the character and proximity of 
neighboring nations, with the numbers of people to be gov- 
erned and protected, with the character and civilization of the 
people, with the variety and extent of the industrial and com- 
mercial interests to be conserved, and with tl\e form and 
spirit of the government itself. The cost of government in a 
savage tribe is apparently nothing — no taxes are levied or col- 
lected — but the possessions are meager, and these are not 
unfrequently swept away entirely by an adverse war. In a 
great and rich nation, the cost of government is necessarily 
large, but the property is immense, and the tax taken from 
each citizen is usually insignificant in amount. 

iio The objects of taxation. — The general purposes for 
which taxes may be legitimately taken are the following: 

1. Public administ7'ation, including the, legislation, the judicial 
functions, and the general administration by the executive 
officers of the government. 

2. Public safety, to be secured by police or military power 

against foreign or domestic foes. 

(341) 



342 POLITICAL ECONOMY. 

3. Public improvements for the general well-being, by public 
works. 

4. Public intelligence, to be promoted by public schools, 
public libraries, scientific investigations, and scientific and art 
collections. 

5. Public charities, or the care of the poor and the unfortu- 
nate or afflicted classes, — the insane, the imbecile, the deaf 
mutes, and the blind. 

These are the recognized ends of good government, and 
are, therefore, the proper objects of taxation. 

12. The right of taxation. — The right of governments to 
levy taxes is commonly supposed to rest upon the duty of each 
citizen to contribute for the common safety and for the promo- 
tion of public order and well-being. Others claim that the 
government earns its support by the protection it gives; in 
other words, the citizens hire the government to defend them 
and their property, and pay the hire in taxes. But, as has 
been shown, there is a deeper basis of right than this, in 
the fact stated, that society is a silent partner in every man's 
business, and does by its presence create much of the wealth 
which it pr^erves. Government stands as the representative 
and agent of society, and in collecting taxes does but take 
the property of society for the use of society. The amount 
which it may properly take is limited by the needs of society, 
as taxes can not be rightfully taken for any other than public 
uses. 

13. Basis of taxation. — Taxes may be considered as im- 
posed upon persons, or upon property. The former, or the 
personal tax, takes no account of the man's possessions, but 
claims from him the tax as his payment for the support of 
government, or for public good. The personal tax may be a 
simple charge per capita, or poll tax, imposed upon all citi- 
zens alike; or may be a license tax paid upon the professional 
or business calling. The fees charged for official service are 
sometimes a tax upon the person, as the fee for a teacher's 



TAXATION. 343 

certificate or a marriage license; but more frequently they are 
a tax upon property, as are the fees for the inspection of 
goods, and for the verification of deeds and mortgages. 

The second, or the property tax, takes no account of 
ownership, but asks for a share of the property for the public 
use. The payment is of course exacted from the owner when 
he can be found; but in his absence or failure to pay, the 
property is taken and sold for the tax. 

Taxes upon property are of two kinds — the Direct and the 
Indirect tax. The direct tax is charged upon the person who 
is expected to pay it, and may be a personal or a property 
tax. The indirect tax is levied on the manufacturer or im- 
porter of the taxed goods, and is usually added by such 
manufacturer or importer to the prices, to be paid finally by 
those who purchase and use the goods. There are large 
economic as well as political differences between these differ- 
ent classes of taxation. 

Another important classification of property taxes rests upon 
the question whether such tax is assessed upon capital or 
upon income. The common tax upon property is assumed to 
be a tax upon capital, and to be paid out of the accumulated 
wealth. The tax levied upon a man's ascertained annual in- 
come is assumed to be paid out of the year's production. In 
fact, however, all taxes may be counted as paid out of pro- 
duction whenever they and the necessary expenditures of the 
tax-payer do not exceed his annual product. 

14. Systems of taxation. Among barbarous peoples no 
regular system of taxation is known. Each man is called 
upon at need to fight for the public defense, and, if necessary, 
to render public service. The chieftain or ruler, if not sat- 
isfied with the income from his own lands, or flocks, or ef- 
forts, supphes the lack by the confiscation of goods of his 
subjects accused or convicted of crime. In other cases, he 
sells privileges, or monopolies, or extorts gifts, or takes by 
force of arms from neighboring tribes. Such was most of the 



344 POLITICAL ECONOMY. 

taxation by the feudal chieftains and monarchs in the Middle 
Ages. 

One of the earliest systems of taxation on record is that 
of the Jews under the Mosaic laws. Under this system, a 
tithe, or tenth part, of the annual production was paid for 
the support of the Levites, who included the teachers, magis- 
trates, and priests of the commonwealth. As the state was 
theocratic, religion shared with the government in the taxes. 
Beside the tithe, there were certain personal taxes, as a half 
shekel — about thirty cents — assessed upon every male, and a 
system of religious offerings made by the individual or family 
annually or on special occasions. 

Among the Greeks, nearly every form of taxation known to 
modern times was in use, but with much irregularity and 
many abuses. The Romans also were fertile in expedients to 
extort taxes, both from their provinces, and finally from the 
subjects or citizens of the empire. Their custom of farming 
out the taxes — that is, selling the taxes to some tax-gatherer 
for a gross sum, and allowing him to extort from the tax- 
payers as much as possible — was perhaps one of the most ef- 
fective, but at the same time the most ruinous, methods of 
taxation ever devised. 

The first approaches to the modern systems of taxation were 
made by Venice and the other Italian republics, which im- 
posed taxes upon lands, and upon manufactures and imports. 
But taxation remained unequal and tyrannical In its methods 
on the continent till after the upheaval of the French revolu- 
tion. Before that revolution, the property of the nobles and 
of the church was exempted from impost, and less than one 
third of the property of France paid the entire taxes for the 
support of government. Few chapters of history are fuller of 
tyranny and meanness than those which record the devices of 
the governing classes to possess themselves of the hard earn- 
ings of the common people. 

15. Ideas of the modern system. — The first clear state- 



TAX A TION. 345 

ment of the principles of a true system of taxation was made 
by Adam Smith, in the four maxims which John Stuart Mill 
says "have become classic." These maxims are as follows: 

1. "The subjects of every state ought to contribute to the 
support of the government, as nearly as possible, in propor- 
tion to their respective abilities; that is, in proportion to the 
revenue they enjoy under the protection of the state." 

2. "The taxation which each individual is bound to pay 
ought to be certain, and not arbitrary. The time of payment, 
the manner of payment, the quantity to be paid, ought to 
be clear and plain to the contributor, and every other person." 

3. "Every tax should be levied at the time, and in the 
manner, which is most likely to be convenient to the contrib- 
utor to pay it." 

4. "Every tax ought to be so contrived as to take out, 
and keep out, of the pockets of the people as little as possible, 
over and above what it brings into the treasury of the state." 

These principles, in conciser terms, affirm that taxation 
should be equal and proportionate; that it should be certain, 
clear, and public; that the collection should be convenient in 
the time and manner of payment; and that the collection 
should be inexpensive. 

It is probable that every law-maker would assent to these 
general propositions ; but a wide difference of view will prevail 
as to the means of carrying them into effect. 

Amasa Walker proposed to add to these rules the following : 

"The heaviest taxes should be imposed on those commodi- 
ties, the consumption of which is especially prejudicial to the 
interests of the people." 

This maxim is the basis of our national tax upon alcoholic 
liquors — a tax, the policy of which is now violently opposed 
by large numbers of temperance people. They affirm that 
the tax meant to be repressive, gives currency and credit to 
the practice to be repressed, and thus supports it against more 
direct moral and legal efforts for its entire suppression. 



346 . POLITICAL ECONOMY. 

Most of the systems of taxation now in vogue recognize 
these rules of Adam Smith; but they vary widely in the tax- 
ables chosen, in the kinds of taxes imposed, and in the methods 
of assessment and collection. In the United States we have: 

1. Taxes imposed by the general government — embracing 
import duties, excise taxes on spirits, tobacco, and medicines, 
and certain direct taxes on persons and property. 

2. State taxes — including direct taxes upon lands and other 
property, license taxes upon several kinds of business, and 
fees for certain official services. 

3. Municipal taxes, imposed by county, township, district, 
or city authorities, including taxes upon property, poll taxes 
upon persons, license taxes upon business, and fees of officers. 

16. The two difficulties.— The two chief practical diffi- 
culties in taxation are to secure (i) equity and certainty of 
assessment or levy, and (2) ease and certainty of collection. 
The interests of the government and the rights of the people 
alike demand that all taxables shall be assessed, and assessed 
at their true value; and they also alike demand that the tax 
shall be collected with the least effort and hardship, and in 
full amount. No system of taxation is wise or even tolerable 
which does not fairly meet and master these two difficulties. 

17. Obstacles to assessment. — The difficulty of fair 
and certain assessment is twofold: i. The true measure of 
values can only be positively determined in open market, 
where the competing estimates of buyers and sellers may help 
to correct each other. The assessor who views alone the 
property to be taxed must often mistake its real values, es- 
pecially when large estates, houses full of furniture, or store- 
houses full of goods, are to be assessed. The difficulty is 
multiplied by the fact that the several districts fall to differ- 
ent assessors, who not only vary in their estimates, but are 
liable to be influenced by personal or local preferences, or by 
the desire to favor their friends and their neighborhood by a 
low assessment of taxables. 



TAXATION. 347 

2. The other obstacle to full and fair assessment lies in the 
strong temptation to tax-payers to lighten their tax by the con- 
cealment of their wealth. Money and many other forms of 
property are easily hidden from sight, and thus readily escape 
assessment. When mortgages or other securities are to be taxed 
the difficulty is greatly increased. The requirement of the oath 
of the owner is only a partial remedy, and is open to high 
moral objections. The usage, said to prevail in some coun- 
tries, of holding the assessor responsible to the -government 
for any loss which may accrue to it from failure or deficiency 
of assessment, might be more effective if it were less expen- 
sive in application. 

In most sections of the United States the assessment is 
made systematically below the real valuation, lands being as- 
sessed at one half, or even one third, of their cash value, and 
other property in proportion. The object of this is to guard 
against the deficient assessment of other sections of the same 
county or state, over which a common tax is to be levied. 
The practice serves only to confuse still further the entire 
system of taxation, and to render it more certainly unequal 
and unjust. 

18. Obstacles to collection. — The chief obstacles to the 
easy and sure collection of a tax lie in the inability of the 
tax-payers, or in their absence or indisposition. The first is 
partly met by the exemption from taxation of the household 
goods and common tools, which constitute often the only 
possessions of the poorer laboring classes. But the payment 
of the annual tax is sometimes beyond the ready means of 
even the small householder, impoverished, it may be, by fail- 
ure of health or of work. In the densely populated countries 
this must frequently occur. 

In the second case, that of absent or unwilling tax-payers, 
the time for collection still more frequently goes by, leaving 
the taxes unpaid. In all these cases, of both classes, no re- 
mission of the tax is usually possible, or even thought of. 



34S POLITICAL ECONOMY. 

The tax not voluntarily paid must be collected by law, which 
means, in modern times, by the distraining and sale of the 
goods taxed, or a sufficient part thereof to pay tax and costs. 
And here lies the difficulty. The sale of property for taxes is 
always expensive, and generally odious to the popular feelmg. 
No kindly man Hkes to buy his neighbor's goods from the tax- 
collector; and the sale of lands for the taxes, with the rights 
of redemption always and justly reserved to the defaulting 
owner, is so full of hazard and uncertainty that few honora- 
ble men care to purchase. The buyer of "tax titles" is, in 
jnost American communities, a man of evil repute. He is 
counted as speculating on the misfortunes of his neighbors, 
if not as taking selfish part with the government against the 
people. Even the default of the tax-payer, if poor, is forgot- 
ten in the hardship of the enforced tax. The government 
gets its revenue, but it is only after long delay, and at the 
sacrifice of some part of its popularity. This last may indeed 
be little, where the form of government is popular in charac- 
ter, as in this country ; but it is still so great that wise and 
patriotic statesmen seek to avoid or lessen it by merciful and 
conciliatory tax legislation. 

19. Direct taxes. — Of the great forms of taxation, the 
direct and the indirect, the former is often approved for its 
apparent equity. It is levied directly upon the person who 
is expected to pay it, and is either a personal tax upon him 
as a citizen, or a property tax upon his possessions according 
to their value. The claim of the government is seen to fall 
just where it belongs, upon each citizen according to his ob- 
ligation and ability, and the exact amount and justice of the 
claim are seen and known of all his fellow-citizens. Its pay- 
ment is also public, ap^d it thus meets three of Adam Smith's 
maxims. 

It is an additional advantage of the direct tax that its 
amount can be accurately fixed, and can thus be proportioned to 
the exact needs of the government. The assessed valuation of 



TAXATION. 349 

all taxables being known, and the amount of the required tax 
being determined, it is but a simple problem of arithmetic to 
apportion this amount fairly among the tax-payers, according 
to their wealth or business. This particular advantage of the 
direct tax will always commend it to the states and smaller 
districts in which the public needs can be nearly ascertained 
beforehand, and in which it is desired to collect only the ex- 
act amount required. 

But direct taxes upon wealth have also their disadvantages. 
They involve all the difficulties of a universal assessment of 
property, which, as has been seen, are neither few nor small. 
The apparent equitableness of the tax is almost constantly 
vitiated by the obvious inequalities of the assessment. So 
also the pubHcity of collection is offset by the hardship of 
that collection. In this respect the direct tax is the most bur- 
densome of all taxes in proportion to its amount. Coming 
usually once a year, with its inexorable demand for the en- 
tire tax of the year to be paid at once, few find themselves 
able to pay it without a consciousness of the burden, and 
fewer still suffer the sacrifice of their property to public good 
without reluctance. Half the satisfaction felt in seeing the 
tax fall equally on the property of others, comes from the 
consciousness of its burdensome weight upon ourselves. 

20. Income taxes. — The income tax is a direct tax upon 
the annual revenue or income of the person taxed. It takes 
no account of capital or wealth, but looks solely to the an- 
nual product accruing to the man from whatever source. 
Amasa Walker has praised this as the most equitable of all 
taxes, because, as he assumes, each man's ability to pay is 
proportioned to the amount he actually receives. He affirms 
that every man can know, and ought toSyiow, almost exactly 
what his income is for each year, and that he may, without 
hardship or injustice, be made to reveal that income to the 
public. 

Different opinions will be entertained upon these claimed 



350 POLITICAL ECONOMY. 

advantages, but income taxes have always been unpopular, 
and have rarely been resorted to by modern governments 
except under the pressure of some extraordinary need, and 
then always as a supplementary tax to eke out an insufficient 
revenue. Were the entire tax for the support of government 
levied upon incomes, its inequalities would be speedily mani- 
fest. Not only would the sight of vast masses of untaxed 
wealth disturb the public mind, but it would be found that 
the power to pay taxes is by no means proportioned to the 
annual income. The poor laborer, whose scant and uncertain 
wages scarcely meet the most common wants of himself and 
his family, could not, without distress, pay even one per 
cent of his income as a tax, while a millionaire might pay 
ninety per cent without the sacrifice of a single comfort or 
luxury even. 

The governments employing this tax have been obliged to 
recognize this disparity of power to pay, and they have gen- 
erally exempted from taxation all incomes under a given 
amount. They have, moreover, fixed a higher rate of taxa- 
tion upon the larger incomes. This itself is a public admission 
that the income is an uncertain basis of taxation and needs 
to be limited by other considerations than its amount — a seri- 
ous if not a fatal objection to it. 

The chief of these limiting considerations is found in the 
fact that income must be correlated to expenditures. Equal 
incomes do not imply equal necessary expenditures. One in- 
come may be drawn upon to sustain a single life; another, 
of like or even less amount, may be required to sustain ten 
lives. One man way, from choice or necessity of position, 
be called upon to contribute largely for great social, scientific, 
educational, or religious interests, and these taxes may be 
enforced by personal or public motives that scarcely leave 
him any choice in the payment; his neighbor, with equal or 
perhaps larger income, may selfishly ignore all these claims, 
and leave to others the burden of sustaining the civilization 



TAXATION, 351 

and public well-being from which he, as well as they, draws 
advantage and profit. This objection lies also^ it is true, 
against the tax upon wealth; but that does not diminish its 
validity or force against the tax upon incomes where its stress 
is comparatively greater, since, in general, all taxes must be 
paid out of annual production. 

A final and more serious objection to taxes upon incomes 
is found in the indefiniteness and uncertainty of the revenue 
produced. In a year of great prosperity the aggregate in- 
comes of the country may rise to nearly double their ordinary 
amount, and, in a year of disaster, they may fall to a half. 
The public revenue would follow the fluctuations of incomes, 
and the government would accordingly get the double or only 
the half of tax required for its wants. 

21. Indirect taxes. — Indirect taxes, collected by govern- 
ments upon goods in the hands of the manufacturers, import- 
ers, or traders, are paid finally by the consumers of those 
goods, the tax being concealed in the price charged them. 
The history of indirect taxes is nearly as old as that of gov- 
ernment itself. They were imposed both by Greeks and 
Romans, and were common through the Middle Ages. They 
furnish a large part of the revenues of modern European -na- 
tions, and they are almost the sole support of our own na- 
tional government. Against many and serious objections, 
their simpHcity of assessment and ease of collection have con- 
tinued to make them the favorites of statesmen and of the 
people. 

22. Evils of indirect taxes. — The indirect tax is wholly 
unequal as far as wealth is concerned. It takes no account 
of capital or of income. The man who drinks his cup of 
coffee, smokes a cigar, drinks a glass of beer or brandy, or 
uses any foreign fabric on which duties are charged, pays for 
each one his tax to the government, whether he lives in a hut 
or a mansion, and whether he cuts clods or coupons. And in 
the aggregate, the poor man often pays nearly as much as the 



352 POLITICAL ECONOMY. 

rich, since with his large family he may consume nearly as 
much of taxed goods as the other. This is especially true if 
the tax is laid upon the necessaries of life. A tax upon lux- 
uries may be avoided by those who prefer to forego the 
enjoyment of these luxuries rather than pay the tax. 

The indirect tax is also grossly uncertain in the revenue 
yielded by it. As the consumption of the taxed goods must 
constantly vary with the abiHty and tastes of the consumers, 
the tax may yield one year a deficiency and the next an 
enormous surplus. Such has been the history of the indirect 
taxes collected by our general government. 

It is another objection to indirect taxes that, being paid by 
the manufacturer or importer, he must, in order to re-imburse 
himself for both tax and risk, increase the charge upon the 
consumer beyond the amount of the tax, and thus multiply 
the burden upon the real tax-payers beyond the amount col- 
lected by the government. This adds a private tax to the 
public impost. 

This tax, moreover, is imposed neither upon production nor 
upon capital as such, but upon consumption, and therefore 
directly intermeddles with and influences the industries whose 
products it taxes. It is not, therefore, a purely fiscal machine 
for collecting revenue, but is also a governmental agency which 
may be, and often is, used to repress an undesirable business 
or to protect a useful one. Its necessary interference with 
trade may therefore be harmful or beneficial, according to its 
use. 

23. Advantages of indirect taxes.— But while the in- 
direct tax thus violates two of the maxims — that of equaHty of 
burden and that of definite yield — it meets more fully than 
any other the two difficulties of assessment and collection. 
It levies its tax in the workshop or warehouse of the manu- 
facturer or at the port of entry, before the goods are scattered 
among many owners. It deals with articles whose amount 
and value can be nearly ascertained and which have known 



TAXATION. 353 

market prices, and it holds these goods under official care 
and control till the tax is paid. 

While thus collected by the government without difficulty, 
it is paid by the people without hardship and almost without 
knowledge of it. Hidden in the price, and distributed over 
a great number of purchases, it is paid in small amounts 
taken day by day, and is thus unnoticed from its smallness as 
well as its commonness. 

This very ease of payment has been sometimes urged as an 
objection, as rendering the people indifferent to the amount 
of taxation and the government extravagant in its takings and 
expenditures. It is assumed that the hardship and irritation 
of the direct tax will keep the tax-payer's vigilant and alert 
to guard their interests and hold their rulers to strict account. 

24. Taxables. — In the practice of different governments, 
taxes have been imposed upon nearly every class of objects 
used by mankind. Not only lands, houses, and commodities 
in general have been counted as taxables, but the house and 
the ground on which it stands have been taxed separately, 
and additional taxes, as in France, have been imposed upon 
the doors and windows. Taxes upon dogs, horses, and other 
animals; upon carriages and harness; upon watches, musical in- 
struments, and household furniture; on all forms of incomes 
and of expenditures; upon newspapers and law papers; upon all 
forms of business and of amusements, have been resorted to in 
order to secure the required revenue. In earlier times, when 
possessions were small and taxes were shunned, the ingenuity 
of rulers was exerted to discover new taxables and new meth- 
ods of taxation. In modern times many of these are retained, 
partly with the purpose of distributing the burden of taxation 
over a wider surface, as it were, and thus lightening its ap- 
parent weight; and partly from the desire of equalizing its 
demands and allowing no one to escape his due share of con- 
tribution to the support of government. 

The question of the best selection of taxables still remains 
p. E.-30. 



354 POLITICAL ECONOMY. 

one of the most difficult problems of the law-maker. An in- 
discriminate ad valorem tax upon all existing property, without 
regard to its character, would be a tax upon capital alone, 
and would leave the great volume of annual production out 
of sight, except as it is drawn upon by the tax-payers them- 
selves to pay their taxes. What might be paid easily by highly 
productive property would be ruin to property of low pro- 
ductive power, such as farm lands are, generally, as compared 
with commercial and manufacturing property. So, also, a tax 
laid indiscriminately upon all commodities, whether luxuries 
or necessaries, would fall with undue force upon the poor, 
who must consume necessaries almost as freely as the rich, 
while the latter may forego, the luxuries and escape their tax 
if they will. A man with an income of $500 must expend 
nearly all of it for necessaries for himself and family. The 
man who has an income of $5,000 or $50,000, having 
no* larger family, will spend litde more for necessaries, and 
after all expenditures for luxuries, may still have a large un- 
taxed surplus. 

A tax upon necessaries yields the largest and most certain 
revenue. A tax limited to luxuries might prove so heavy as 
to prevent their use, and thus cut off revenue and stop pro- 
duction. A large list of taxables may make the tax system 
cumbrous and confusing, but it tends to distribute the burden 
and to equahze the pressure. He who unjustly avoids one 
tax may be caught by another, and thus be compelled to 
bear his part in the common burden. 

25. The unattainable in taxation. — Evidently just, as is 
Smith's first maxim, and desirable as it seems to tax every citi- 
zen in proportion to his ability to pay, the experience of ages 
proves that this is unattainable. Nearly every inexperienced 
legislator who is sent to represent the people, comes with the 
desire to so amend the tax-laws as to force all to pay their 
proper share of the taxes. He does not see that he desires the 
impossible. In his determinadon to allow nothing and no one to 



TAXATION. 355 

escape, he. imposes taxes upon debts as well as upon property, 
and doubles the burden upon the one he is attempting to re- 
lieve. He is attempting to use the tax system as an instru- 
ment to punish the money-lender for his extortion, and he 
frequently only doubles the burden of the extortion; for as 
capitaHsts will only lend for the current rate of interest, they 
secure their end by charging sufficient interest or bonus to 
cover the taxation, or by stipulating that the borrower shall 
pay all taxes. 

The insuperable obstacles to the exact equality of taxation 
are these two: 

1. The impossibility of a perfect valuation of property ac- 
cording to its tax-paying power; or, of a perfect adjustment of 
a levy on commodities or incomes which shall bear with exact 
equality upon all. 

2. The readiness with which the tax-payer may, in so many 
cases, transfer to others the burden of the taxes meant for 
himself. This latter fact is true, not only of the indirect taxes 
upon commodities manufactured or imported, and which are 
expected to be charged over upon the consumers; but it is 
true also of all those cases in which the conditions of trade 
will allow the owner of property to fix his own price upon 
its use or sale. Thus, the tax upon a rented house or farm 
will be added, when possible, to the rent. The merchant 
adds the taxes on his store and stock to the prices of his 
goods, and the licensed dealer collects his license tax from 
those who patronize his business. In general, it may be as- 
sumed that every tax-payer will shift to others as much as 
possible of his taxes, and no legislation can prevent this 
without it can change the course of trade and the ever-vary- 
ing relations of values. All those who live upon salaries or 
wages, and those whose products, like the farmers', must be 
sold at prices fixed in the world's open market, must be 
content to pay their taxes with slight chance of collecting them 
back from others. 



356 POLITICAL ECONOMY. 

In the long run, the strong tendency of things is to throw 
the burden of taxes upon consumption. The consumer must 
pay for his goods all the price they come loaded with, from 
whatever source that price may spring, and whatever charges 
it may include. 

26. The equilibrium of taxes. — As all things that obey 
gravitation tend towards a level, so all burdens imposed upon 
any of the industries of mankind, either directly or through 
their products, seek to distribute themselves over all. There 
is thus a law of equilibrium of taxes which tends constantly to 
equalize, as far as possible, the burden wherever it may have 
been first imposed. 

To illustrate this law, let us suppose a tax, which would be 
thought most of all unjust, and perhaps least hkely to be 
distributed — a tax upon common labor. Let us suppose that 
each laborer was required to pay one tenth of each day's 
wages to the government. The result would be an increase 
of wages to that extent. The general law of wages, as an- 
nounced by Turgot, is that wages tend always to the level of 
the cost of living; and as the tax proposed would act as so 
much addition to the laborer's cost of living, it must be added 
to his wages. This, in turn, would increase the cost and 
price of all things produced by labor, and so the tax would 
ultimately be paid by all who purchase or consume these 
products. Instead of labor, let the entire tax of the country 
be laid upon land; the effect, would be to raise the price of 
every product of the land, and so again an equalization would 
follow. Let us pass to the other extreme, and suppose the 
entire tax of the nation to be imposed upon luxuries — upon 
silks and jewelry, for example — the probable effect would be 
to so increase the price and diminish the sale as to defeat the 
tax and compel its transfer to articles of greater necessity. 
But if we may suppose the enhanced price to be paid, it must 
be paid at the expense of a nearly equal retrenchment in 
other purchases; since it can not be supposed that many of 



TAXATION. 357 

the rich will be found wilUng, if able, to increase so largely 
their expenditures in one direction without a corresponding 
retrenchment in others. Even with the wealthy there is a 
nearly fixed relation of expenditure to income. The retrench- 
ment would throw the burden of the tax upon the manufact- 
urers and dealers in the retrenched goods, and thence, by 
various and obvious channels, it would reach out to others 
till the equihbrium was found. 

It is not claimed that this law or tendency is so quick and 
perfect in its operation as to reduce all inequalities in taxation ; 
but in any settled system of taxes, where the properties taxed 
are sufficiently wide and various, it may be relied upon to 
distribute the burden more equally than any legislation is 
likely to do it. Uniformity, simplicity, and certainty of tax- 
ation are more important than any attainable legal equality. 

27. Economic principles. — Viewed economically, every 
tax is an impost upon property and production. It is a price 
paid for police and protection; or, at best, the payment exacted 
for certain public convenience's; a charge faUing upon the 
industry and business of the people. All that economy re- 
quires is that the charge shall be as light as possible, and 
shall be collected with the minimum of disturbance of the 
course of trade. These demands may be stated as follows : 

1. The amount of tax should only equal the real wants of 
the government. A lavish and ostentatious government, that 
gathers and expends unnecessary millions, disturbs industry 
both by its exactions and by its large expenditures, thus making 
a double disturbance of the common course of trade, repress- 
ive and stimulating by turns. 

2. The collection should be as much distributed as possible 
in times and amounts. A heavy tax collected at once, if such 
a thing were possible, would fatally derange business, stopping 
the payment of private debts, and abstracting so large a por- 
tion of the common currency as to block the wheels of trade. 
The annual taxes collected by the States would work annual 



3S8 POLITICAL ECONOMY. 

ruin, if, by a stretch of the laws, the collections were not 
distributed through several months, thus allowing time for the 
money to be paid out and get again into circulation. As it 
is, a severe stringency in the local money market is often 
produced, and much hardship is frequently wrought. A large 
number of Hght taxes, payable at different times in the year, 
would be much more philosophical in principle and easier in 
practice than the wholesale annual taxation now in use. The 
indirect tax, paid little by little, as the daily purchases are 
made, is on that account the lightest of all taxes. The tax 
system of France is superior to ours by its subdivision of 
taxes among so many taxables, and its frequent payments. 

3. Under strict economic principles the tax should not favor 
or oppress one industry at the expense of others. Such par- 
tiality may sometimes be. allowed for a time for national ben- 
efit, but it is always in violation of economic principles. 

28. National principles. — Viewing the nation as an or- 
ganism — a body whose parts are knit together by vital rela- 
tions and mutual dependence, in which the health of each is 
the health of all, a tax is a process for the transmutation of 
a certain amount of private property into pubhc safety, public 
intelligence, public convenience, and pubHc good. It- is the 
contribution which the stomach and working organs pay to 
the brain and nervous system. It is what the nation costs and 
consumes in maintaining and working the organism. Its 
amount, its modes of collection, and its expenditure, must be 
controlled by the conditions of national life, and yet with a 
strict regard also to the individual rights and interests of the 
citizens, since the life of the nation is no other than the 
grand aggregate of individual lives. The tax taken for the 
nation is taken from the individual. It is not alone the tariff, 
or tax upon imports, which affects the domestic manufacturer 
competing with the foreign. The home tax, which falls heav- 
ily upon its labor, materials, or machinery, must diminish the 
power of any industry to compete with its foreign rival. 



TAXATION. 359 

The highest problems of taxation are evidently national in 
character. The tax is taken, as the nation's right, to be used 
for the nation's good. Its collection is an act of national 
sovereignty, and it distinctly enounces the national well-being 
as paramount to all personal and private interests; or, if this 
statement is preferred, as inclusive of them all. Taken in 
this light, the national demands are : 

1. Taxes, in amount, in time and modes of collection, and 
in expenditure, should take into account the character and cir- 
cumstances of the state or nation, its needs, its powers, and 
its true progress. A monarchy demands a certain stateliness 
and splendor, which may lend dignity to power and excite the 
admiration of its people. A republican government should be 
on a level with the people — simple, serviceable, and without 
pomp or parade. A people of few industries, such as an 
agricultural people, can not pay, and do not need large taxes. 
A commercial nation requires, and can pay more. A people 
of wide territories and great diversity of employments, can and 
must necessarily pay larger assessments. Thus a hundred cir- 
cumstances of national hfe go in to hx the amount of national 
expenses. 

2. A tax that is needlessly large both oppresses the nation, 
taking for its governing brain the substance of its working 
hands, and also injures the government, pushing it into false 
and feverish overaction or ruinous, lavishness. The extrava- 
gance of one year becomes the rule for the next; and, having 
once overpassed the limits of safe and economic expenditures, 
few governments have the virtue or the courage to return to 
a lower rate. They are launched on a current ever swifter, 
and with more fatal and resistless flow. The luxurious gov- 
ernment corrupts and then impoverishes the people. It lives 
an intoxicated, and hence a dangerous and perilous, hfe. 

3. Taxes react on the national character, and ought, there- 
fore, to be adjusted to promote public virtue and well-being. 
If the tax can be so levied as to repress harmful luxuries or 



360 POLITICAL ECONOMY. 

vices, or to promote helpful industries and public virtues, such 
ought to be the rule. The certainty of the result ought to 
be ascertained beyond reasonable doubt, and the limits of 
personal liberty ought not to be transgressed except to secure 
a greater public good. No wisdom can make the burdens 
and benefits of taxation fall with exact equahty upon all and 
to all; but a steady regard for the good of the whole nation 
will, in the end, compensate for minor inequalities. A true 
pubHc good is, in the end, universal private good. 

4. Taxes are taken to nourish the nation in its whole hfe — 
not simply to arm it against its possible enemies, or to provide 
it with prisons for criminals; but to feed its brain, its heart, 
and its laboring hands. 

The most palpable and conspicuous function of government 
is to govern — to make and administer laws to secure rights 
and to guard the life and property of citizens. In this chief 
function the highest officers of the government and a vast army 
of officials are engaged; and the very splendor of state which 
surrounds it, gives to it undue predominence in its demands 
on the public purse. The expenses of government are almost 
the only unquestioned objects of appropriation. All other ob- 
jects are considered by many as beggars sitting at the govern- 
ment gate. Half the immense sums habitually wasted in the 
luxurious idling, or the party squabblings, of legislative bodies, 
or extravagantly spent on overpaid and underworked officers 
and agents of administration, if appUed to works of pubhc 
improvement and enHghtenment, would both enrich and ele- 
vate the nation. 

The government is not the master of the people, but their 
servant and agent; and, as such, it must be held to effect for 
the people those great public works which, from their magni- 
tude and pubhc character, private enterprise will not undertake 
and could not accomphsh. All public works, required for the 
business or the safety and health of the people, may claim 
their share in the public expenditures as much as the mere 



TAXATION, 361 

making and administration of laws. In a healthful body, 
brain, heart, hands, feet, and every organ are equally and 
impartially fed and nourished. 

29. The limits of taxation, — It is evident that there 
must be a limit beyond which the people could not, or would 
not, continue to pay taxes. It is obvious also that this limit 
must be far within the annual net production of wealth, or 
even the annual savings; for the people will not continue to 
produce if not permitted to enjoy the larger part of their 
products; and if savings be made impossible, the spirit of in- 
dustry will be destroyed. It has been computed that the 
average annual savings out of the annual production of the 
United States are not more than 5 per cent. A tax that would 
average 5 per cent of the production would therefore forbid 
any increase of wealth, unless it be by enhanced valuation. 

No tax should be allowed to diminish or prevent production ; 
but taxation will diminish production long before it absorbs 
the entire savings. It may be assumed that a thrifty people 
will make up for a moderate tax by extra industry or econ- 
omy; but when the impost is greater than they can meet in 
this way, and they find their savings lessened below their 
sense of security and need, they will seek to change their 
employment or their location. The instances are not rare 
where the incoming of capital has been forbidden, and the 
more difficult outgoing of labor and capital has been produced, 
by excessive taxation. 

Taxes on future production by the issue of bonds to be 
paid in subsequent years, are the most frequent means of 
overtaxation. Public improvements of large extent, or the 
pressure of war, may compel the incurring of public debt; 
but such a debt is always an addition to the current taxation 
of the future, and may easily carry it beyond the limit which 
the people can endure, without suffering and loss. 



p. E. 



CHAPTER III. 

PROTECTION AND FREE TRADE. 

30. The tariff battle. — The fiercest economic debate of 
modern times is that between the advocates of a protective 
tariff and the champions of free trade. After a hundred years 
of conflict, the battle still rages with all its old violence. 
Volumes have been written, interminable masses of statistics 
have been arrayed, and speeches and reports without end 
have been made on both sides : on the one hand, to prove 
that a protective tariff is a wise and useful measure of na- 
tional policy; and, on the other, to demonstrate its public 
folly and its personal hardships. 

On the one side, in this controversy, stand most of the 
economists; on the other, are found the apparent majority of 
peoples and statesmen. But the economists are not unani- 
mous; nor indeed are statesmen and peoples. 

The tariff battle has been rendered fiercer by the vast 
amount of capital, invested in great industries, and the armies 
of laborers held to be concerned in the result. National 
prosperity, independence, and power are claimed to be at 
stake, and the work and wages of labor are affirmed to be 
involved in the issue. 

The impossibility, thus far, of reaching a conclusion to 

which all can assent, proves the difficulties of the problem, 

and rebukes the assumptions on both sides, of its simpHcity 

and its easy solution. After allowing for all partisanship of 

politicians, and all mercenariness of manufacturers who par- 
(362) 



PROTECTION AND FREE TRADE. 363 

ticipate in the debate with selfish motives, there remains a 
wide and honest divergence of opinions among thousands who 
wish for Hght and anxiously seek the truth. It must be pat- 
ent to all fair minds that there are difficulties in the questions 
involved, beyond those ordinarily stated by the economists. 
It would not take the civilized world a century to settle a 
question so simple and easy as they assume this one to be. 

31. Definitions. — Let it be explained, for the benefit of 
new students of this question, that : 

1. A tariff is a tax, or system of taxes, laid on goods im- 
ported from foreign countries, and collected commonly at the 
port of entry, where such goods are landed. The word tariff 
is derived from the name of the Spanish town Tarifa, on the 
Straits of Gibraltar, where a tax was formerly levied by the 
Moors upon every vessel passing the Straits. 

The tariff taxes, commonly called duties, or customs, belong 
to the class of indirect taxes. They are made up of specific 
duties, charged upon the quantities of goods, without regard 
to their values, at so much per yard, gallon, pound, ton, or 
other measure of amount; and ad valorem duties, levied upon 
goods according to their values, as shown in the bills or in- 
voices of the importers. 

2. Protection. — This word is used to express some public 
aid or favor to home manufactures to defend them from 
losses which might arise from the competition of foreign man- 
ufactures of the same sort. 

3. A revenue tariff \s one laid for the sole purpose of collect- 
ing revenue for the uses of government, and is properly made 
up of duties on goods not produced at home, as the tax on 
these will be paid without interfering in any way with the 
prices of domestic goods. 

4. A protective tariff lays its charges on foreign goods com- 
peting with home manufactures, and, by adding to the prices 
of such foreign goods, prevents their underselling and crowd- 
ing out the domestic manufactures. 



364 POLITICAL ECONOMY. 

5. Free trade means, literally, trade with foreign countries 
untrammeled by taxes or restrictions. But most advocates of 
free trade favor a tariff for revenue as a convenient mode of 
national taxation. They only demand that the duties shall 
not be laid on competing goods. 

32. The double question. — The question in debate, in 
this old controversy, has a double form of statement, as it is 
seen from one or the other of the two points of view; or rather 
there is a double issue confounded in the discussion. 

The protectionist regards the tariff as a national question. 
At the bottom of every argument made by him, lies the as- 
sumption that there is a national interest, broader and deeper 
than the individual interest, and that the promotion of this na- 
tional interest is of importance to all the members of society. 
He perceives, more or less clearly, the unity of the national 
organism, and feels in his own life and business the pulse- 
beat of the national life. If he seems to be pleading the 
cause of some limited group of manufactures, it is because he 
wishes to preserve that industry to the nation. His error, if 
he is in error, comes from his point of view, and it must be 
answered from the same point of view. 

The free trader, on the other hand, looks at the tariff as it 
affects individuals, either as producers or consumers. He 
claims that whatever is good for individual citizens will be 
good for the nation ; that the private interests of the people are 
identical with their public interests. He considers the tariff as a 
simple tax affecting the tax-payers and their business. If any 
manufacture can not live without protection against its foreign 
competitor, he questions whether it ought to live at all. To 
him the tariff is a tax laid upon the many for the benefit of 
the few„ 

It may easily be seen that the issue is not fairly joined in 
this debate. The answer of each party to the other is, in a 
large measure, irrelevant. Hence, the arguments of neither 
convince the other. The economists, as students of Economic 



PROTECTION AND FREE TRADE. 365 

Science, affirm the validity of the great natural laws of trade, 
and deny that special manufactures can be wisely, if even 
successfully, built up in opposition to these laws. The pro- 
tectionists, having in mind social laws and needs, beHeve the 
natural laws of trade are insufficient, and claim the importance 
of public interference to secure results which natural laws 
would never bring about, or Avould not effect in time for the 
national needs. The two doctrines, of protection of industries 
by tariffs, and of freedom of exchange or trade, are not exact 
contradictories, since they are not answers to the same ques- 
tion, hence the truth of the one does not prove the falsity of 
the other, and the falsity of either does not affirm the truth 
of its opposite. 

The subordinate questions, of the effects of the tariff upon 
prices, present and future, and of the distribution of the 
burden of the taxation, on which so much of the debate is 
ordinarily expended, can evidently never be properly discussed 
or wisely settled till the great main questions are definitely 
determined. 

33. The protection doctrine. — The doctrine of the pro- 
tection of home industries by means of a tariff on foreign 
goods rests upon three principal assumptions, or postulates, as 
follows : 

1. The interests of the nation, as a united body of people — 
a living organism — require something more than, and different 
from, what is required by its individual citizens. 

2. These national interests demand a wider and earlier di- 
versification of industries than the natural laws of life and 
trade would, of themselves, bring about. 

3. A tariff or tax upon imported goods is a wise and effect- 
ive means of securing and preserving the home industries de- 
sired. 

If any one of these postulates fails, the doctrine of protection 
must fail with it. Their united force is required to support 
the conclusion. If they can all be sustained, in their full in- 



366 POLITICAL ECONOMY. 

tegrity, the doctrine will stand unassailable. The importance 
of the consequences involved, as well as the economic in- 
terest of these postulates themselves, demands their careful 
scrutiny. 

34. First postulate, national interests. — It may be 
admitted that the common sense of mankind, as shown by the 
history of all peoples, recognizes such a thing as national in- 
terests distinct from, and overtopping, individual interests. 
Everywhere and in all communities, men have felt that there 
is a common safety, which includes indeed the individual 
safety, and for which they may rightfully be called to fight 
and die if necessaryo They have also recognized a common 
well-being of society, higher than any personal well-being, to 
which all may justly be required to contribute of their per- 
sonal wealth and service. This common well-being is made 
up of the common security, the public order, morals, and in- 
telligence ; the general supply of products and of work, the 
public improvements and conveniences, and the national power, 
reputation, and independence. All this is something more 
than the sum total of private and personal qualities, posses- 
sions, and condition. 

It is true that public interests are made up of private inter- 
ests, but not of merely personal interests. To the interests 
and rights belonging to the man as a living being, must be 
added those which belong to him as a social being and as a 
member of society. These latter often he outside of his per- 
sonal possessions and immediate surroundings, but are nearly 
as necessary as those to his development and happiness. In 
trade and industry all things may seem personal, but the in- 
terests of industry and trade can not be separated wholly from 
other personal or public interests. The whole man enters 
into society, and must be protected and considered in his 
entirety. 

What we call public interests belong to separate groups, or 
rather, to different concentric circles of different diameters. 



PROTECTION AND FREE TRADE. 367 

The man has certain interests in common with his village; 
other interests in common with his township; others still in 
common with his county and his state; and, finally, others 
which belong to the nation. Wise men recognize all these, 
and seek to promote them in some proper way. The villager 
often strives to increase the prosperity of his village by seek- 
ing to secure immigrants, or by offering a bounty to manu- 
facturers. He promises himself both personal and puWic 
advantage from the increase of population and wealth. It is 
true that the smaller community sometimes needs protection 
from the other communities united with it in the large com- 
munity of which they form part. A tariff between states, or 
even between counties, would sometimes defend one against 
the overmastering competition of the other; but this rather 
increases than invalidates the force of the argument for na- 
tional protection. The clear recognition of the narrower pub- 
lic interest which every man can see and appreciate, opens 
the way for the admission of the wider national interests which 
only a few are intelligent enough to see in all their breadth. 
It is not needful here to enumerate all the interests which 
belong to a civilized people; but we may name, as involved 
in the present discussion: i. An abundance of work for all 
workers, and wages for their work. 2. A sufficient diversity 
of industries to utilize all natural resources and give employ- 
ment to all talents. 3. An abundance of wealth to meet, 
without hardship, all necessary taxes for the public good and 
safety. 4. A sufficient common intelligence and civilization to 
properly enjoy and maintain the form of government chosen 
by the state. 5. An equahty of condition with confronting 
nations, that may protect from their hostility, and prevent them 
from imposing undue burdens, or winning undue advantages 
from age or position. The rival nation is a factor that can 
never be left out in any complete estimate of our national 
interests and concerns. And as nations, like corporations, are 
soulless, and are generally actuated by selfish motives, it is 



368 POLITICAL ECONOMY. 

all the more necessary to take their conduct and condition 
into account in studying our own. If we have national inter- 
ests, they have national interests also, and it is not impossible 
that the one shall conflict with the other. The conquest of 
arms is not the only form of national aggression. There is a 
conquest of commerce more frequent and nearly as fatal to 
the subjugated nation. 

35. Second postulate, — diversification of indus- 
tries. — The national importance of a variety of industries 
among the people does not need argument. In a general 
sense, all parties admit it, however they may differ as to its 
desirable extent, or as to the means of securing it. To give 
the largest amount and variety of employments to the people; 
to properly utilize all the resources of the country, and to 
furnish at home the markets for the several productions of 
labor, are objects so palpable that no one will deny them. 
The higher influences of diversity of employment on national 
civilization, and on national power and wealth, may not be so 
obvious, but they are equally true and important. 

In a savage state, and in the first stages of colonial hfe, 
the industries must be few and simple. The savage contents 
himself with few gratifications; the colonist imports most of 
his from older countries. Manufactures require both capital 
and skill, and there is usually a dearth of both of these in a 
new settlement. Increase of population usually brings increase 
of wealth and of intelligence, and so industries naturally advance 
in quality, multiply in amount, and divide into separate 
branches. But history shows that new populations are slow 
in introducing new industries widely different from their own. 
It shows, also, that the migrations of manufactures have more 
frequently been due to some fortunate accident, than to nat- 
ural causes or the laws of trade. England owes her silk 
and woolen manufactures more to the immigration of Flemish 
and Huguenot fugitives than to any natural growth in her in- 
dustries. 



PROTECTION AND FREE TRADE. 369 

It is possible that all the forms of industry to which any 
country is naturally adapted, might, in time, come in by the 
laws of trade ; but generations and centuries must often elapse 
before the result would be reached. The assumption of the 
protectionist is in keeping with the facts of history; the na- 
tional interest demands a wider and earher diversification of 
the industries than the natural laws of trade would produce. 

36. Third postulate, — the tariff power. — The third as- 
sumption is by no means so clear, and so nearly self-evident 
as the two former. A tax upon imported goods is, at best, 
only an indirect way of producing or promoting new indus- 
tries. As shown, many years ago, by President Wayland, a 
tariff does not directly and necessarily increase the capital or 
the labor-power and skill of a country, and these are the im- 
mediate and only indispensable conditions of founding a new 
manufacture. Such a tax may stimulate and sustain a man- 
ufacture already started, by securing it a better price for its 
goods; but it will not certainly lead to the establishment of 
new manufactories. Indirectly, by raising the prices of goods 
of the sort taxed, it may induce capitalists to import or em- 
ploy capital in their production ; and such is the way in which 
the tariff is expected to accomplish its results. It is claimed 
that the silk manufactures, and some others, were introduced 
into this country by this means. Whenever unemployed 
capital is sufficiently abundant in the country, it may be as- 
sumed that it will seek investment in new industries as fast as 
they become profitable and safe. So far as the tariff secures 
to them this safety and profitableness it promotes this invest- 
ment. 

37. Is the protective tariff wise? — To judge of the 
wisdom of the tariff as a means to the desired end, it must 
be compared with other means available for the same end. 
Three other methods have, in different cases, been employed 
to secure the establishment of new industries : i. A direct 
donation to the capitalist to induce or aid him in the founding 



370 POLITICAL ECONOMY. 

of his manufactory. 2. A bounty paid by government for each 
given amount of goods manufactured. 3. A release from all 
taxes upon the capital or labor employed in the new industry. 

Each of these three methods has an advantage over the 
protective tariff in the certainty of result, for nothing is paid 
till the result is assured. Under the tariff, the tax must be 
paid upon all goods imported, whether it induces home man- 
ufactures or not; but no one is pledged by it to introduce or 
maintain any new industry. 

It is a second advantage that all the money paid under 
either of these three is given directly for the purpose in view. 
Under the tariff, all the money collected by the tax goes to 
the government, and the manufacturer gets his aid by impos- 
ing a similar tax upon his customers in the higher price of 
his goods. 

A third advantage of these methods lies in the definite 
amount of the taxation imposed by them. As we have just 
seen, the tariff imposes a tax upon all the imported goods for 
the benefit of the government, and allows the imposition of 
an equal or greater tax by the manufacturer upon all the 
goods produced by him. This may greatly exceed the amounts 
actually required to secure the establishment and support of 
the home industry. 

On the other side, the protective tariff has some advantages 
over the other methods proposed : i . As an indirect tax for 
the support of the national government, the tariff has strong 
claims; and to make it protective, needs only to distribute it 
upon the goods competing with home manufactures. 2. The 
machinery for the assessment and collection is a common and 
necessary part of the machinery of government. Custom- 
houses, and custom-house officers belong to the ordinary ar- 
rangements for the management of the commercial intercourse 
with foreign nations. The use of this common machinery in 
the way of a protective system for the promotion of domestic 
manufactures, does not compel the establishment and maintenance 



PROTECTION AND FREE TRADE. 371 

of any new system. 3. The operation of the protective tariff, 
though uncertain in its results, is simple and easy in its work- 
ing. The other systems, though more direct and definite, 
would involve great practical difficulties in their operation, and 
be liable to great abuses. It is doubtful whether more serious 
complaints would not be raised against the direct donation to 
capitahsts from the public funds than have ever been made 
against protective tariffs. 

The advantages and disadvantages of the protective system 
being so nearly balanced, the decision as to its wisdom must 
rest finally upon its efficiency. If facts prove that it is effect- 
ive, it must be approved; but, if it can not be shown to be 
efficient to the end proposed, it must be condemned. At the 
last, therefore, it becomes a question of fact, to be settled by 
statistics. 

38. The postulates of free trade. — To complete our 
fundamental view of the principles involved in this discussion, 
it is necessary to inquire what are the postulates on which 
the arguments of the free traders rest. These postulates are 
as follows : 

1. Freedom of trade or of exchange is freedom of labor and 
of industry. 

2. If exchanges are left free, men will do those things that 
they can do best; they will devote themselves to the indus- 
tries for which they and their circumstances are best adapted. 

3. Each land and nation has special industries for which 
the people by nature, or by their circumstances, are pecuHarly 
fitted, and which they ought to pursue till, at least, the nat- 
ural laws of trade shall lead to the introduction of others for 
which they are equally fitted. 

Free trade also makes several assumptions which are rather 
to be counted as objections to protection, and which mast 
therefore, be answered as such. But, first, let us examine the 
postulates already stated. On the truth of these, the doctrine 
of free trade must mainly rest; though, if they fail, their 



372 POLITICAL ECONOMY. 

failure does not establish the doctrine of protection by tariffs, 
because, as we have seen, the two doctrines are not perfect 
contradictories. 

39. First postulate — Free trade is free industry. — This 
postulate implies that human industries have no other barriers 
than those imposed by the restrictions on trade, and that if 
men are left free to buy and sell when and where they please, 
they will be free to change their employments as they may 
choose. 

To this it must be replied that the great hindrances to the 
changes of employments are found in the immobility of labor 
and capital. It is well known that laborers, in general, move 
reluctantly and with difficulty from one locality to another, 
and that the passage from one employment to another is still 
more difficult. So, also, capital is not easily shifted from one 
investment or industry to another. It fears loss in untried 
channels, and prefers safety to uncertain profits. No freedom 
of trade can increase the mobility of labor or the confidence 
of capital. The industries love beaten and familiar paths. 
Men follow easily the employments of their fathers and prede- 
cessors. Restrictions upon trade may force them into new 
labors to secure the goods they are not allowed to buy; but 
the removal of the restrictions will only leave them free to go 
on in the old ruts. 

40. Second postulate — What men do best. — The sec- 
ond postulate affirms that there are things which each man 
can do best, and that he ought to be left free to do those 
things instead of others which he can do poorly, if at all. It 
assumes that if men are permitted to exchange their products 
freely, they will drift naturally to these best and most profita- 
ble employments. Thus, a hatter can make hats well, but he 
can make boots only poorly, if at all. If left free to follow his 
own good sense, he will spend his time in making hats and 
exchange them for the boots and other products which he 
may need. But it is not always true that men's old and 



PROTECTION AND FREE TRADE. 373 

wonted employments are the most profitable in the long run, 
even if it is true that they can, for the time, do that best which 
they have best learned to do. The wild Indian can doubt- 
less hunt and fish better* than he can raise wheat or rear 
cattle; but who will say that it is best and most profitable 
for him to follow his old savage ways, and continue forever 
to hunt and fish? Every advance made by any nation in its 
arts has been achieved by leaving the things it could do best, 
and learning to do something it could not formerly do at all. 
Certainly, there is a sacrifice which always accompanies a 
change of employment; but the question is, whether the 
final gain does not compensate for the immediate loss? If 
there are in any country more hatters than there is market 
for hats, the change of employment may be a necessity for 
some of them, however well they may know their trade. 

41. Third postulate — The best national industries. — 
The third postulate is only an extension of the. second; but it 
seems to have an additional force from the known diversities of 
climates and productions of different countries. It affirms that 
natural causes, found in environment or character, determine 
the industries of peoples, and that these causes, or the natural 
laws of trade, will introduce new industries as required. 
China raises tea, and Brazil coffee. Why not leave tea and 
coffee raising to these nations, and we follow our natural in- 
dustry, if we have one, and exchange its products for tea and 
coffee ? Our rich prairie lands mark us for agriculture ; is 
not England equally marked out for manufactures? Ought 
we not, then, to sell the English people our corn and buy 
their cloths and crockery? 

The answer has already been given in part. What has 
been said of the individual is true also of the nation. But a 
further answer is required to the new features of the inquiry. 
It is true that climate and soil determine the territorial limits 
of some of the agricultural industries. It is useless to plant 
cotton in New England, or maize in Great Britain. The 



374 



POLITICAL ECONOMY. 



character and habits of peoples, also seem to adapt them to 
certain special classes of industry. The makers of the Persian 
carpets, of the Indian shawls, of the Flemish laces, and of the 
Chinese porcelain seemed for centiuries to have no successful 
rivals. France still claims a supremacy in certain cloths, 
silks, and gloves ; Russia in its peculiar iron ; Japan in lacquer 
ware, and England in a score of articles. 

The truth seems to be that agricultural industries depend 
largely upon soil and climate, and a few hand arts are special 
to certain countries and peoples, either by natural characteris- 
tics, or by long use and the skill resulting therefrom. But 
the great part of manufacturing industries are cosmopolitan in 
character, and may be prosecuted successfully by any people 
whose situation allows the necessary accumulation of capital, 
and whose civilization favors the acquisition of the needful 
skill. Nearly all of the arts are now spreading themselves 
throughout the world, and scores of peoples are now contend- 
ing for markets formerly possessed exclusively by one. 

The introduction of new industries, it is claimed, will be 
brought about by natural causes and the laws of trade. New 
manufactures, it must be admitted, do gain foot-hold in all 
civiHzed lands, whatever be the commercial or governmental 
poUcy of those lands. In some cases, bold and adventurous 
artisans or capitalists undertake the introduction, and, after 
more or less of disastrous failures, succeed in naturalizing the 
new art. Little by little, the art is improved; new processes 
and machinery are invented; new capital and skill are gath- 
ered around it, and the small beginning becomes, in time, a 
great national industry. As the wealth and population of any 
country increase, the industries of that country necessarily 
divide into branches and multiply in number and extent. The 
natural desires and cultivated tastes of men demand higher 
gratifications with every increase of means; and the imitative 
spirit of mankind impels to the borrowing of the arts of neigh- 
bors near or remote. 



PROTECTION AND FREE TRADE. 375 

But it is obvious, from history and from contemporary obser- 
vation, that the adopted poHcy of some nations favors the in- 
troduction of new forms of industry, while that of others 
repels it. In earher days, new manufactures were often 
looked upon as innovations to be feared and watched; in 
modern times, they are sought for as new sources of wealth 
and power, and are welcomed as advantages to citizens and 
to state. Protective tariffs grew out of this modern spirit, 
and are attempts to give government aid to the introduction 
of new arts. 

Looked at closely, the conditions of the establishment of 
any manufacture will be seen to include: i. Capital 2. Skilled 
labor, and 3. Market. Capital sufficient to provide machinery, 
buy materials, pay labor, and meet all expenditures till a 
market can be reached, is a first requisite; and this capital 
must be created by other industries, or it must be tempted 
from concealment, from other investments, or from foreign 
lands. Skilled laborers to build and run the necessary ma- 
chinery, and to perform all the processes of the art with suffi- 
cient expertness, must be imported from abroad or trained up 
at home. But goods will not be made without a market; 
and where the competition is large and serious, it is some- 
times very difficult for a new manufacturer to secure a market 
against the rivalry of old and well-known competitors. A 
market also implies an adequate demand, and remunerative 
prices; for no one can continue to manufacture if only half 
of the product of his mills can be sold, or if they must be 
sold without profit. 

All of these conditions are costly at the outset, and the bur- 
den of this cost must fall upon the manufacturer, or upon 
the pubhc. The progress of trade and wealth doubtless tends 
to lighten them all, and might, in time, overcome them. The 
protective tariff proposes to throw their weight upon the peo- 
ple at large, and thus secure a much earlier victory. 

Such are the answers that science is bound to give to the 



376 POLITICAL ECONOMY. 

postulates of free trade. As in the case of the postulates of 
protection, they leave some questions of fact to be settled by 
statistics, and, therefore, fail to end the debate by a final and 
conclusive answer, 

42. Objections to protection. — Free trade interposes other 
serious objections to protective tariifs, and as these objections 
make up no small part of the common arguments, it becomes 
the more important to consider them. Even if the assump- 
tions of protection are, for the main part, true, and if those 
of free trade are chiefly inadequate or unsound, it still re- 
mains that protection is nothing but a device to accomplish a 
given desirable result, and if the objections to it overbalance 
its advantages, it ought to be abandoned. 

\st Objection. The protective tariff imposes a tax upon the 
many for the benefit of the few; that is, upon all consumers 
for the benefit of the few manufacturers. This objection is 
evidently irrelevant, since the avowed purpose of the tariff is 
to aid the manufacturer by laying the burden of introducing 
and maintaining the new manufacture upon the people at large. 
But the objection is also false in form. It is a complaint 
against the inequality of the burdens and benefits of taxation, 
and, as such, will lie in some sort against every tax imposed 
by government; for no tax ever was, and none ever will be, 
equal in its bearing upon all. 

A defensive war may be absolutely necessary to the safety 
and life of the nation, but its burdens will fall with terrible 
and destructive force upon some, while it will enrich others. 
The proper question to be raised is not as to the taxation, 
but as to its object; and this is equally true whether a tax is 
laid to defend the nation or to promote the industries of the 
country. 

2d Objection. A part only of the money paid by the people 
comes into the public treasury, the greater share going to the 
manufacturers; that is, all the advanced price paid on the 
imported goods taxed goes to the government; but all paid 



PROTECTION AND FREE TRADE. 377 

for the goods manufactured at home goes to the manufacturers. 
This objection is also irrelevant. The very object of the tax 
is to raise the prices of the goods produced at home in order 
to induce their production. The aim and efficiency of the tax, 
and not simply the tax itself, must be the ground of objection. 
If the protective tariff does really introduce and support do- 
mestic manufactures, it accomphshes that for which it is levied 
and in the way proposed. It might be proper to object that 
the tax is inordinate; or that it does not accompHsh its pur- 
pose, which would imply that it is too small. But to object 
to any protective' tariff at all must properly be based upon a 
denial of the object of such taxation. 

3d? Objection. The protective tariff interferes with trade, and, 
hence, with the natural course of industry, forcing men out 
of employments which are profitable, and into those which 
are unprofitable. It is sometimes added, that the people, by 
doing what they can do best, will get the foreign goods which 
they desire, cheaper than by attempting to make these goods 
for themselves. This objection again is irrelevant. The pur- 
pose of the protective tariff is to interfere with the natural 
course of industry in order to introduce new industries. It 
seeks to compensate some men for turning away from indus- 
tries in which they may be expert, to others which are strange 
to them. And it seeks to do this for a greater good which it 
hopes to attain for the people and the country in coming 
times. 

The interference with a natural course of events, that is, 
with the blind action of natural causes, is not necessarily wrong 
or evil. All human civilization has come from such interfer- 
ence, in putting men upon doing things which the savage 
does not do by nature, or in restraining them from courses 
which savage nature allows. 

' There are many forms given by different writers to the 
above objections; but they may all be readily reduced to 
these forms, when the same answers will apply. 

p. E.— 32. 



378 POLITICAL ECONOMY. 

/\^th Objedmi. It is impossible for any statesmanship to so 
adjust the terms of a protective tariff that its advantages shall 
always fall where they are most needed, and that its burdens 
shall not equal or overpass its benefits. This objection is di- 
rect and serious. It discredits the claims of protectionists on 
their own grounds, and, if fully sustained, must go far to over- 
turn their theories. A remedy which exceeds the skill of hu- 
man beings to apply successfully and safely is no remedy at all. 

It must be admitted by all candid men that the difficulty 
with our tariffs has been their cumbersomeness and their in- 
equaUty; and it has thus far been beyond the power of our 
National Congress to enact a tariff law free from these objec- 
tions. But it will be answered that the same imperfection at- 
taches to all human legislation, and that any other method 
of effecting the same public purpose would necessarily lie open 
to the same difficulty and objection. Most of human action 
proceeds upon probabilities, and must, therefore, be uncertain 
in its results. Thus again we are brought to a question of 
fact to be answered by statistics. 

43. The true questions. — If the foregoing discussion is 
sound, then the real questions to be answered are these two : 

I.. Is it proper and wise for a nation, through its govern- 
ment, to attempt to promote the diversification and growth of 
its industries? 

2. Does experience prove that a protective tariff does effi- 
ciently promote the diversification and growth of national in- 
dustries? 

All arguments and objections that do not touch one or both 
of these two questions are irrelevant, and out of place in the 
discussion. All objections to the inequalities of taxation; all 
complaints as to the benefits or burdens of the taxes imposed; 
all affirmations as to how individual men can buy cheap or 
sell dear; all these, and many others with which economists 
have filled their volumes of debate, belong to other questions, 
and have no proper place in this debate. 



PROTECTION AND FREE TRADE, 379 

It is the perception, by people and statesmen, of this ir- 
relevancy of the arguments and objections of the economist 
which has robbed those arguments and objections of their ex- 
pected force, and led to the condemnation of their authors as 
mere theorizers and doctrinaires. 

44. The national question. — The first, or national, ques- 
tion has already been partly answered in a previous chapter 
on the organization of the nation. Different views are held 
by statesmen as to the functions and powers of government, 
and different opinions will prevail as to the wisdom of gov- 
ernment interference in matters of trade and industry. Ad- 
mitting, as we must, that all taxation involves incidental in- 
terference with industry, it will still be asked whether the aim 
of the true legislator ought not to be to render this interfer- 
ence as light as possible, rather than to attempt to employ it 
as an agent of restriction or impulse. 

The industries of the people fill the chief chapters in the 
national life. They occupy and sustain the population, and 
furnish to the government its chief objects of legislation and 
oversight. It must burden these industries with taxes for na- 
tional good; may it also foster them for national good? 

The extension and prosperity of the industries concern 
almost equally all classes of citizens; for they include not 
only the questions of production and wealth, of ease and 
comfort, but also of work for workers and of wages for work. 
The industries underhe and support pubHc order and well- 
being, education, good and cheap government, civilization, 
and the very existence of society. No question can be more 
national in character, more universal in application and influ- 
ence, than that of their prosperity. 

If government may at all undertake this work of promoting 
the industries, then it may surely lay taxes and impose re- 
strictions needful for the purpose. This is no further inter- 
ference with private liberty than the nature of the case re- 
quires. 



380 POLITICAL ECONOMY. 

It is plain that the protection, to be wise and just, must 
take into account the present industrial condition of the nation. 
A protective tariff among savages would be an absurdity. 
They have no manufactures, worthy the name, to protect, and 
they have neither the wish nor ability to engage in new ones. 
Nor, at the other extreme, is protection necessary to a people 
who overtop all rivals in their manufactures. As the savage 
seeks a free foreign market in which to buy his powder and 
shot, and his meager supplies so the great manufacturing na- 
tion, outrivaling all others, seeks free foreign markets to sell 
its surplus. The savage's home market does not yet exist; 
the home market of the great manufacturing power is fully 
preoccupied. 

A German writer has suggested that there are different 
stages of national progress that need to be taken into account 
in setthng the policy of a protective tariff. We may easily 
discriminate three such stages in which the question will wear 
a different aspect, and demand a different answer: i. The 
barbarous or nomadic stage, in which the nation or tribe has 
no manufactures to protect, and does not care to introduce 
any. 2. A middle stage, in which the nation has begun to 
manufacture, and in the presence, as it were, of the older 
and more advanced nations to which it has served hitherto 
as a market. Its young and feeble manufactures, feeble in 
capital and skill, without foreign market and insecure in their 
own, must evidently languish through a long and uncertain 
infancy unless helped by the public or protected by the gov- 
ernment. 3. A final stage, in which the nation, after years 
or centuries of experience, has grown rich in capital, is full 
of inventors and machinery, and has armies of skilled labor- 
ers at command, and, besides all this, has the run of the mar- 
kets ©f the world. To such a nation the term protection is 
without meaning, since they have no rivals to fear, unless it 
be in foreign markets where their protective tariffs could not 
apply. 



PROTECTION AND FREE TRADE. 381 

These stages of national industries may, in some sense, be 
found also in each one of those industries. Any manufacture, 
in its infancy, may need protection against its foreign rivals; 
but when it has grown strong, and, fining its own home 
markets, it goes forth to the conquest of other markets, pro- 
tection is to it an insult, if not an absurdity. 

The doctrine of protection loses all its significance and 
reasonableness when it is applied to industries hke this. If 
by any means the nation, or any one of its industries, has 
relapsed into the feeble stage, or if openly hostile measures 
have been taken against such industry by its foreign rivals, 
the case is changed, and protection may be invoked to ward 
off the threatened evil. 

45. The question of fact. — As has been shown, the whole 
tariff question resolves itself at last into a question of fact. 
''Does protection protect?" Does the protective tariff do 
what it is designed to do? Does it increase and promote the 
national industries? To this question a vast amount of statis- 
tical answer has been given. The history of the civilized 
nations for centuries has been ransacked, and the example of 
each has been put in evidence on both sides. But, unfortu- 
nately, there are so many other causes that enter into the 
production of each claimed result, that the full influence of 
the presence or absence of a protective tariff can not be fully 
ascertained. There lies before me, as I write, three separate 
accounts of the industrial policy and condition of the modern 
German Empire. The first states that it has only a low tariff 
and is virtually without protection, but is, nevertheless, in a 
very prosperous condition. The second affirms, on the au- 
thority of a German writer, that "Germany is perishing," 
and gives as the cause of her condition, her adherence to the 
protective policy. The third, in a popular work on Political 
Economy, asserts that Germany presents a splendid example 
of the prosperity which follows from free trade. With such 
careless discrepancy of statements meeting us on all sides, and 



382 POLITICAL ECONOMY. 

in nearly every case, it will not be wondered at that the 
question of the influence of a protective tariff is still the bat- 
tle-field of economists and statesmen. 

In the United States the difficulties of the tariff question have 
been greatly increased, and the controversy has been embit- 
tered by the division of the nation into separate States, each 
claiming a modified sovereignty, and each having such an 
extent of territory and such a diversity of soil, position, and 
chmate as to render it almost a separate people. The tariff 
that has protected one has oppressed another of these States. 
The manufacturing States have asked for protection; the agri- 
cultural States for free trade. Sectional and partisan strifes 
have distorted facts and obscured the vision, and the question 
has been one of sections rather than of science. Private greed 
has purposely added to the confusion, to get gain; and the 
real arguments and issues have often been lost from sight. 
The progress of new manufactures in the Southern and West- 
ern States is now turning them into tariff advocates, while 
New England, having reached the third state of manufacturing 
life, is becoming free trade in its views. 



TO THE TEACHERS OF POLITICAL ECONOMY. 



Political Economy is not a science for children. As you know, its study 
requires more knowledge of human affairs and a wider observation of 
business than are possible to the very young. It is not necessary, there- 
fore, that its text-books shall be written in the familiar style or with the 
extreme simplicity of statement demanded in books for primary or inter- 
mediate instruction. 

The study finds its proper place in the higher classes of the high- 
schools and colleges. It asks and repays the thoughtful study of grown 
men and women. 

It belongs chiefly to the class of Subjective Sciences, and as such it 
demands a large use of the student's reflective powers. This is best se- 
cured by frequent, if not daily, requirement of original answers in writing, 
to specific questions on the principles and applications of the science. 
Without abundant writing, such studies are rarely well done. Every 
chapter, and nearly every paragraph of this volume, furnishes topics 
which may well be filled out with further study. 

But Political Economy has a large practical side allying it to the 
Sciences of Observation, and hence the student should be required to ob- 
serve carefully and report intelligently the economic facts of his own 
neighborhood. He ought to be able to interpret the fluctuations of values, 
the money phenomena, and the economy of the industries of the vicinity. 

It is also a Statistical Science, and demands a training in the proper 
study and use of statistics. The statistical tables in this volume are 
not to be memorized, but they will afford practice in analyzing, com- 
paring, and interpreting statistics — one of the most difficult arts of states- 
manship. Statistics represent facts in masses. Their accuracy should be 
beyond question ; their relations should be fully considered, and they 
should be so arranged and classified that their real significance is seen. 
He who wields well statistics, wields arguments of unanswerable power. 

(383) 



384 POLITICAL ECONOMY. 

Questions and Questioning. 

In more elementary books and branches of study, it is common to pro- 
vide questions in the book; but in advanced studies, in which the stu- 
dents are expected to make their own analysis, prepared questions are 
of little use, and may be injurious. They may tempt the pupil to forego 
that very effort at analysis which is the most useful and important part 
of his work. Better to require of the student to make out for himself a 
list of questions or topics which shall touch the very heart of each section 
and paragraph. 

The art of teaching is, in large part, the art of asking questions. No 
one can teach well who can not question promptly and wisely. The aim 
of questions is threefold: i. To awaken thought and attention; 2. To 
ascertain what the pupil knows; and 3. To correct and instruct. If the 
teacher is a master of his subject and book, he will easily make his ques- 
tions as the work goes on; but, if a pressure of other work, as is too often 
the case in high schools, prevents such mastery of the lesson of the day, 
questions should be prepared beforehand. Let the teacher read through 
the chapter, pencil in hand, and, at each paragraph jot down on the mar- 
gin, OT on a separate sheet, the question or topic which will bring out the 
truth or principle involved. Such questions will serve him better than 
any that any author can prepare. 

The Card System. 

This system is one of the most convenient for ordinary questioning, 
or for reviews. Let the teacher procure a good quantity of blank cards, 
a little smaller than common playing cards; on each of these cards let him 
write one or more of the questions on topics above described, numbering 
the cards for his own convenience. The questions and topics should be 
such as will fairly cover the ground of the instruction. 

At the opening of the recitation, a card may be handed to a student 
in place of an oral question, and a full answer required thereon; and so 
on till the lesson is completed. Or each student may be required to draw 
a card in turn, at random, and answer at once the questions drawn. In 
this latter case, the cards may first be shuffled, and the questions, coming 
out of order, will more fully test the student's mastery of the lesson. 

• Reviev^s. 

No teaching can be successful that neglects constant, daily, persist- 
ent reviews. The unalterable laws of mind refuse accurate and perma- 
nent knowledge of any book or subject, on any other conditions than this. 



INSTRUCTIONS TO TEACHERS. 385 

He who reviews best, teaches best ; and commonly the teacher who re- 
views most, teaches most. 

The first review should be made the next day after the lesson is re- 
cited. It need occupy but a few minutes, if the lesson was well learned, 
but it should show that the subject is understood and remembered, 

A partial, miscellaneous review may be made at any time when the 
hour of recitation is not fully occupied, by distributing a few of the cards, 
and requiring the students to answer promptly the questions they chance 
to draw. A little care in the use of the cards will enable the teacher to 
pass the whole subject again and again in review in the course of the term. 

As often as once a week, at the outset of the term, the whole hour 
should be given to the review, and the cards will afford the means of 
making this review thorough and searching. These frequent and thorough 
reviews the first half of the term will make' the progress of the latter half 
rapid and safe. 

No harm can come if the students copy the cards as they frequently 
are inclined to do. If the questions are wide and general, covering fully 
the ground, the special study of the answers will give a good body of 
the subject thorough lodgment in the mind ; and a few oral questions 
will prevent mere memoriter learning. 

One of the most useful reviews may be given by requiring the pupils 
to reproduce on the blackboard, from memory, the tabular or synoptical 
views given in this volume. It will tend to systematize and keep in order 
the student's knowledge of the subject. These synoptical statements on 
the blackboard afford also a good method of recitation by requiring the 
students to explain the topics in their order. 

The Book. 

■ This volume, designed to afford a somewhat full discussion of the 
subject, for the general reader as well as for the student, presents, in some 
cases, a wider discussion than is needed for the class-room. The author, 
therefore, advises the omission, at least in the first study, of such parts 
as the teacher may choose to omit. This may sometimes be whole chap- 
ters, and, in other cases, paragraphs or parts of chapters. The coat must 
be cut according to the cloth. If only a single term can be given to the 
work, only a portion of the book can be mastered. 



P. E.-33. 



INDEX. 



Numbers refer to pages. 



About, Edmond, title of work, 27. 

Accumulation, a motive for labor 
stronger tinaii gratification, 31. 

Agricultural Capital, four classes of, 
219; amount per acre, 220; in live 
stock, 222. 

Agricultural Economy,synoptic view 
of, 208 ; its peculiarities, 212. 

Agricultural Education, need of, 217; 
value of, 218. 

Agricultural Population in different 
countries, 215. 

Agricultural Wealth in U. S., 215. 

Agriculture belongs to substance- 
changing work, 91; its scope in 
, economics, 91 ; employs forces of 
growth, 105; forms of capital in, 194; 
as an industry described, 209; tvvo 
grand divisions ^of, 210 ; mixed hus- 
bandry, 211 ; classes of soil culture, 
211 ; the wants met by, 212 ; nature of 
its products, 213 ; the materials in, 213 ; 
extent of, 214; nature's gifts in, 216; 
extensive and intensive, 221 ; ma- 
chinery and supplies in, 223; profits 
of, in economy of force, 223; eco- 
nomic mistakes : 1, waste of land, 224 ; 
2, waste of animal force, 224 ; 8, waste 
of capital, 225 ; 4, waste by poor stock, 
225 ; 5, improper rotation of crops, 
226 ; the farm a machine, 313 ; Metayer 
system of renting, 314. 

Animals, rearing of in early times, 
210 ; necessity of, to fertilize soil, 211 ; 
cost of, 218 ; uses of draught and stock 
animals, 222 ; serve on farm as mate- 
rials, machinery, 223. 

Animal strength, its uses changed by 
machinery, 105 ; cost of, 218 ; waste 
of, 224. 

Antagonism of Capital and Labor 
must be between laborer and capi- 
talist, 205. 

Arkwright, Sir Richard, invention 
of spinning-jenny, 264. 

Arts, all reach back to some science, 
25 ; devices suggested by nature, 99 ; 
natural development of, 154. 



Balance of Trade, definition and com- 
mon opinion of, 216 ; is it an advan- 
tage, 247 ; profit depends on use, 248 ; 
influence on labor, 248. 

Bank Checks, use in exchanges, 279 ; 
tabular statement of use, 280. 

Banks described, 278 ; two kinds of, 279, 

Banks of Deposit, functions of, 279. 

Banks of Issue, description of, 281, 

Barter, measure of values relative, 61 ; 
definition of, 240. 

Bastiat, Frederick, his circle of Pol. 
Ec. (note), 12; value to Pol. Ec, what 
enumeration is to arithmetic, 40; 
definition of value, 42 ; denies value 
to mere products of nature, 111, 

Bentham, Jeremy, theory of estima- 
tion of desires, 71 ; on right of prop- 
erty, 286. 

Bowen, Prof., counts Pol, Ec. a men- 
tal and moral science, 15. 

Burchard, H. C, notice of report, 65. 

Business Establishments, large, pro- 
duced by division of labor, 167 ; why 
the large absorb the small, 168 ; dan- 
gers of large, 170. 

Business Managers, labor of de- 
scribed, 137; Say's description, 138 ; 
qualifications required, 139. 



Capital, general view of, 187 ; its nat- 
ure explained, 188 ; its origin and 
four forms, 189 ; two classes of, 190 ; 
forms of in different business, 193; 
productive and non-productive, 194 ; 
fixed and circulating, 195; relations 
to labor, 197 ; 1, their union neces- 
sary, 198 ; 2, gives time to labor, 199 ; 
3, gives power over nature, 200 ; 4, 
commands natural forces, 201 ; 5, rel- 
ative increase, 202; not antagonistic 
to labor, 205 ; two classes in trade, 232 ; 
share of in products, 312 ; compared 
with labor, 312. 

Carey, H. C. , treats Pol. Ec, as national 
and social, 26 ; def. of value, 43 ; ex- 
plains increase of wages, 204. 



Cha 



INDEX. 



Eco 



Chambers, Dr. T. K., on expenditure 
of force in living, 119, 120. 

Cities, flow of wealth to, 325. 

City Growths in modern times, 325. 

Civilization estimated by its wants, 
69 ; mental wants predominate, 73 ; 
division of employments a step in, 
155 ; depends on soil yield, 211 ; 
money, 261. 

Clearing House, description of, 281. 

Clerks and Accountants, industry of 
productive, 137. 

Climates, tropical, discourage indus- 
try, 98; frigid, overburden industry, 
98 ; temperate, natural home of in- 
dustry, 98 ; influences health, 100. 

Coinage, problems of, 267. 

Colbert, promoted industries to in- 
crease taxes, 23. 

Commodities, defined, 31; new use 
of increases demand illustrated, 86. 
See Goods. 

Comparison of Values, cases of, 61, 62. 

Comparison of Values made in trade, 
241. 

Competition between manufactur- 
ers, 133. 

Consumption of Wealth a secondary 
distribution, 319; classes of, 319, 320. 

Co-operation as remedy for competi- 
tion, 308. 

Copyright considered as property, 
144, 296 ; law of in Eng. and U. S., 297. 

Cost, meaning of term, 45. 

Cost of Production, lowest limit of 
natural value, 87; diminished by 
machinery, 129. 

Cotton Manufacture, illustration of 
power of machinery to cheapen 
products, 129 ; its extent illustrated, 
130; invention of spinning-jenny, 
164 ; growth of in England and U. S., 
166. 

Credit, its nature described, 191 ; is 
not wealth, 192. 

Credit Money described, 274. 



Debts increased or lessened by 
changes in money, 265; falsely 
counted property, 299; taxes on, 
300. 

Demand, economic, defined, 77 ; never 
exceeds wants, 77 ; reciprocal with 
supply, 79; laws of, 80; effects of in- 
creased and diminished, 81 ; effects 
of excess explained, 83 ; effect of 
diminution, 84; fictitious created by 
speculation, 85. 

Dependent Class, proportion of to 
population, 116. 

DeQuincey, Thomas, calls Pol. Ec. a 
mental science, 15 ; value the consti- 
tutive idea, 40 ; affirms two elements 
in value, 44. 

Desires, confiict of in values, 48 ; il- 
lustrated in 5 caseSj 49-51 ; becomes 



strong by habit, 75; compared in 
trade, 241. 

Distribution of Labor, reasons which 
control, 185; personal and social 
considerations in, 186. 

Distribution of Wealth, forces caus- 
ing it, 301 ; classes of, 302 ; primary 
described, 302 ; into wages, interest, 
rents, and profits, 303 ; the share of 
wages, 306 ; tabular statement of, 308 ; 
share of capital, 312 ; rent share in, 
312 ; the profit of, 317 ; secondary 
forms of, 319 ; territorial movement, 
324 ; by international trade, 327. 

Division of Employments, its origin, 
154 ; its progress and causes, 155 ; ad- 
vantages enumerated, 157 ; disad- 
vantage of mutual dependence an- 
swered, 157. 

Division of Labor described, 158; 
Adam Smith's view of, 159; advan- 
tages of, 159 ; 1, economy of time, 160 ; 
2, economy of strength, 161 ; 3, econ- 
omy of skill, 161 ; 4, economy of tools, 
162; 5, economy of materials, 163; 6, 
improvement of tools, 162 ; 7, im- 
proves products, 165; 8, multiplies 
and cheapens products, 165 ; 9, masses 
labor and capital, 167 ; disadvantages 
of, 169; three limits of, 172; in intel- 
lectual labor, 172; in the graded 
schools, 173; natural division, 173; 
between establishments, 174; laws 
of value in, 175 ; little used in agri- 
culture, 218. 

Double Standard defined, 268; objec- 
tion of monometalists to, 273. 



Economic Circle, represented, 13; re- 
lations of its sections, wants, wealth, 
and work, 14; with the ti'iangle of 
value inscribed, 40; the work seg- 
ment, 89. 

Economic Science, field of repre- 
sented, 12; three names of, 15; is 
wealth or industry its object (note) ? 
15; begins and ends with man, 17; 
statesmen must look to, 21 ; three- 
fold division, 17 ; importance of this 
division, 21; the three not always 
separable, 22; these divisions 
authorized, 22; present tendency of 
is towards Social Economy, 27 ; other 
subdivisions possible, 28 ; shares un- 
certainty of human will, 28 ; its un- 
certainty does not destroy its utility, 
29 ; not concerned with false and 
fraudvilent prices, 80: laws of exist 
for the intellectual life, 135; not yet 
complete, 331. 

Economics, Pure, defined as the sci- 
ence of value, 18; the natural his- 
tory of work and wealth, 18; na- 
tional, 335. 

Economy, National, 333; synoptic 
view of, 339. 



(388) 



Edu 



INDEX. 



Int 



Education, its aid in acquiring skill 
of American mechanics, 125 ; counted 
as productive labor, 142 ; how It pro- 
motes labor, 181. 

Effort, second side Of triangle and 
element in value defined, 34 ; shown 
to be essential to value, 35; in- 
volves "difficulty of attainment" 
and " scarcity," 35; effort of repro- 
duction counted in estimation of 
value, 35 ; of producer and purchaser 
compared in a bargain, 36; called 
"negative value," 39; variable ele- 
ment, 48 ; five cases of variation, 49- 
51; degree of in diff"erent values 
176. 

Exchange, implies estimation of 
value, 60 ; exchange of commodities, 
four values compared, 61 ; its eco- 
nomic character as an industry, 93 ; 
tabular view of subject, 228 ; needs 
and benefits of, 228; two elements 
in, 230; forms of, 240; both parties 
benefited, 241 ; its eflect on values, 
241. 

Extensive and Intensive Farming, 
description of, 221. 



Farm Labor, character of, 217; not 
largely divisible, 218. 

Fertility of Land chiefly artificial, 220. 

Food, need of in labor, 119 ; amount 
of required by laborer, 120 ; impor- 
tance of s apply, 212, 227; table of 
prices, 310. 

Fourier, on the nation, 333. 

Franchises, nature and classes of, 
298. 

Franklin, Benjamin, proposed labor 
as standard of value, 64. 

Free Labor superior to slave, 179. 

Free Trade, as opposed to protection, 
362; the double question, 364; postu- 
lates of, 371; first postulate dis- 
cussed, 372; second ditto, 372; third 
ditto, 373; the true questions, 378; 
the natural question, 379; the ques- 
tion of fact, 381. 



Garfield, President, on use of bank 
checks, 280. 

Geographical Position, influence on 
industries, 174. 

George, Henry, on advantages of 
trade, 230 ; theory of land answered, 
292. 

Gifts, keepsakes, etc., value of, 57. 

Gifts of Nature, diagram of subject, 
97 ; eflects of abundance or scarcity, 
98; control industry, illustrated, 99; 
unappropriated are valueless, 100; 
natural products a class of, 101 ; 
crude materials a class of, 102 ; nat- 
ural forces a class of, 103 ; illusion in 



regard to value, 111 ; Bastiat's and 
Roscher's views of. 111 (note) ; prop- 
erty in, 291. 

Gold and Silver, their advantages as 
money, 264 ; annual production of, 
269 ; exchange values, 270 ; compen- 
satory action, 272; consumption of 
in arts, 273. 

Goldsmiths' Notes, used as money in 
London, 275. 

Goods, defined, 31 ; necessai'ies and 
luxuries, 72 ; answering physical and 
mental wants, 73; eflfect of different 
kinds on laws of supply and de- 
mand, 87 ; necessaries always in de- 
mand, 87 ; of secondary utility nec- 
essaries or luxuries, 87 ; conti*asted 
with natural products, 103; cheap- 
ened by machinery, 129 ; valued by 
the ideas incorporated, 134; com- 
pared with services, 148; improved 
by division of labor, 165 ; new forms 
and cheapening from division of 
labor, 167 ; for sale and for use, 242. 

Good Will, a kind of property, 299. 

Gresham's Law of money circulation, 
272. 

Grotius on right of property, 286. 

Growth as an economic force, 106. 

Gulf Stream, influence on England, 
100. 



Health, its influence on labor, 178. 

Hire, a form of exchange, 240; how 
differs from trade, 242. 

Hoarding, its advantage, 254. 

Human Strength a gift of nature, 104 ; 
period of efficiency, 115 ; of different 
nations compared, 116 ; cost of rear- 
ing, 117 ; labor power in different 
countries, 118 ; loss of by sickness, 
119 ; cost of sustaining, 119 ; depends 
upon digestion, 120 ; the substitutes 
for, 121. 



Immaterial Property, nature and 

classes, 296. 

Industry, simplest history of, 9; its 
three factors— sphere of, 9; true ob- 
ject of Ec. Sc. (note). 15; real busi- 
ness of Pol. Ec. to guide, 16. 

Insurance, trades on risks, 235 ; dis- 
tributes losses, 236. 

Intellectual Industries, three classes 
of, 137. 

Intellectual Labor, its importance 
shown, 134; counted as productive, 
135; its two fields, 136; second-class 
authors, teachers, etc., 142; products 
of counted as property, 143 ; division 
of, 172. 

Intellectual Work, classes of, 94; in- 
creases with civilization, 95. 

Intelligence increases products and 
values, 134 ; how it influences labor, 



Int 



INDEX. 



Mon 



180 ; influence on quantity of money, 
261 ; the final form of wealth, 331. 

Interest falls as wages rise, 203 ; de- 
crease of in Eng,, 204. 

Intoxicating Drinks, consumption 
of, 321. 

Inventions counted as valuable 
goods, 141 ; favored by division of 
labor, 164. 

Inventors as intellectual workers, 94 ; 
labor of defined, 136. 

Investigator, his work described, 136. 

Investment of Wealth, two laws of, 
323 ; varies with prosperity, 324. 

Jarvis, Dr. Edward, on sustaining 
and dependent classes, 115; on cost 
of rearing children, 117. 

Jevons, Prof. Stanley, def. of value, 
43 ; tabular standard of value, 65. 

Labor, meaning of word, 89 ; diagram 
of topics, 112; represents difficulty 
of attainment, 113; the economic 
battle-field, 114 ; three factors of, 114 ; 
changes caused by machinery, 131 ; 
organization of, 152 ; efficiency of— 
manhood, 178 ; conditions favoring : 
1, health, 178 ; 2, liberty, 179 ; 3, intel- 
ligence, 180 ; 4, morality, 182 ; 5, re- 
ward, 183; self-employed, 184; distri- 
bution of, 185 ; fourth form of cap- i 
ital, 190 ; relations to capital, 197 ; j 



union with capital necessary, 
amount required in trade, 231 ; con- 
trasted with capital, 312. 

Land a gift of nature, 107 ; its uses as 
soil, 108 ; value afl"ected by nearness 
to market, 108; mineral lands, 109; 
its values as site, 109; value of in- 
cludes effort, 110; fertility of artifi- 
cial, 220; right of property in, 288; 
property in, 290; Henry George's 
view answered, 292. 

Land Owners in England and U. S., 
219; proportion of in England and 
Ireland, 291. 

Laws, utility of general law, 79; of 
supply and demand, 80; objections 
to, answered, 81; objections to laws 
of supply and demand answered, 81 ; 
these laws explicated, 81; limita- 
tions of laws of supply and demand, 
82; artificial limitations of laws of 
supply and demand, 84; laws of 
supply and demand limited by pro- 
spective goods, 86; laws of supply 
and demand vary with goods, 87; 
laws of supply and demand de- 
fended, 88. 

Lawyers, services of useful, 148. 

Legal Tender, description of, 253. 

Liberty essential to labor power, 179. 

Lowe, Joseph, invents tabular stand- 
ard of value, 65. 

Luxuries stimulate production, 320. 

(390) 



Machinery, improvement of lessens 
efforts, 49; substitute for common 
skill, 126; cheapens products, 128; 
cotton machinery opposed by mobs, 
129; has not diminished labor or 
wages, 129; industrial revolution 
produced by, 131; economic results 
enumerated, 132. 
Machines, how differ from tools, 127 : 
divided into hand machines and 
power machines, 127; skill trans- 
ferred to, 164 ; second form of capital, 
189; included in the plant, 193. 
Man, understood as constantly pres- 
ent in Ec, 12, 17; three aspects in 
Pol. Ec, 17. 
Management a necessary class of la- 
bor, 138 ; bad m. a tax upon labor, 139. 
Manager (see Business manager). 
Market, different meanings of term, 
77 ; glut of relieved by withdrawal, 
85; glut of relieved by foreign mar- 
kets, 85; description of, 236; three 
classes of, 237; prices, how ruled, 237, 
Material Property, nature and divis- 
ion, 294; subject to loss and decay, 
295. 
Materials, economy of in division of 
labor, 163 ; first form of capital, 189 ; 
diflferent classes of, 193. 
Mercantile Industries, forms of capi- 
tal in, 194. 
Metallic Money, description of, 264; 
disadvantage of, 275. 
I Mill, J. Stuart, counts Pol. Ec. a men- 
tal science, 15; difficulty of attain- 
ment an element of value, 35; de- 
nial of value as central, 40; gives 
two elements of val., 44; on the 
wage fund, 310; on Ricardo theory, 
315,316. 
Mining, a substance-changing indus- 
try, 92. 
Mirabeau on right of property, 286. 
Money, not always capital, 191 ; syn- 
optical view of discussion, 250; pe- 
culiar character of, 250; origin and 
history of, 251; three functions of, 
252 ; the legal function, 253 ; inciden- 
tal functions, 254; as a commodity, 
255; variations in value, 255; fiuctu- 
ations explained, 256 ; effect of fluctu- 
ations, 257; as a measure of value, 
257; as a mediuin of exchange, 258; 
use and utility as medium, 259; im- 
portance of measuring power, 260; 
quantity required, 261; redundancy 
and deficiency, 263; effects of too 
much, 264; effects of too little, 264; 
kinds of modern, 266; circulation of 
in the world, 271. 
Money Circulation, tabular state- 
ment, 262; causes afffecting, 263. 
Money of Account, meaning of, 258; 

its use in exchange, 260. 
Monopoly, def history, classes, 52; 
advantages and dangers, 53; "Cor- 



Mon 



INDEX. 



Pro 



ners," 54; other abuses of, 55; in- 
terferes with supply and demand, 
85; frequent in trade and transpor- 
tation, 234. 

Montesquieu on tlie right of property, 
286. 

Morality promotes labor, 182. 

Mutual dependence of laborers the 
basis of mutual aid, 157. 



IsTation, definition of, 333; relation of 
one to another, 334; a trustee, 337; 
guardian of property, 338; owner of 
all property, 338. 

National Banks, circulation of, 277; 
system described, 282. 

National Economy described, 19,338; 
scope and aim of, 20; its problems 
have two sides, 20; problems enu- 
merated, 20 ; first form of Pol. Ec. and 
reasons, 23; most conspicuous part 
of Pol. Ec, 24; synoptic view of, 
339 

Natural forces as gifts of nature, 
103 ; classes of, 104 ; include forces of 
growth, 105; the economy of, 106; 
non- vital used only by machinery, 
106 ; molar and molecular, 107. 

Natural Products, a class of nature's 
gifts, 101; supply vital wants, 102; 
contrasted with products of art, 
103. 



Organization of Labor, three stages 
named, 152 ; . first stage— undistribu- 
ted, 152 ; second stage described, 155 ; 
the two stages contrasted, 156; third 
stage, 158 ; the three stages compared, 
175 ; the future of, 177. 

Ownership, the third element of 
value, 36; recognized by Presidents 
Wayland and Sturtevant, 37; the 
basis of transferability of values, 37; 
a chief aim in modern industry, 37; 
not a variable element, but basis 
of monopoly, 52. 



Paper Money, amount in circulation, 
271 ; description of, 278 ; two kinds of, 
274; history and advantages, 275; 
compared with metallic, 276; dan- 
gers of, 277. 

Patents granted by modern govern- 
ments, 142; law of in U. S., 297. 

Perry, definition of value, 60. 

Physicians, services of have eco- 
nomic value, 148. 

Piece Wages, stimulating power of, 
184. 

Piece-work, the efficiency of, 305. 

Playfair, Dr. Lyon, on food needed for 
labor, 120. 

Political Economy, science of indus- 
tries, 9; what name implies, 10; its 



elementary facts, 11; its field ex- 
plained, 12 ; Mill counts it mental sci- 
ence, 15; divided into three sciences : - 
Science of Value, Social Ec, and Nat. 
Ec, 18; importance of this division, 
21 ; Pol. Ec. confounded with one or 
other of these divisions, 22; contro- 
versies and questions, 24; its field 
covers the pure science and applica- 
tions, 25; a mixed science, mental 
and material, 25 ; Pol. Ec. a science, 
25; difliculty of the science admitted, 
25; other subdivisions possible, 28; 
popular objection that it fails to fur- 
nish rules, 28 ; its problems changed 
by machinery, 182. 

Power Machinery, its triumphs in 
three directions, 106 ; extent of steam 
machinery, 107 ; enormous strength 
of, illustrated, 128. 

Price, several uses of term, 45; fluctu- 
ations in, 47; monopoly prices, 52; 
excessive and false, 59; of cotton 
yarn, 129; of services, 150; market 
prices, 287; retail prices, 238; eflects 
of money on, 264. 

Price, Bonamy, definition of value, 
48. 

Production a problem of force, 106 ; 
affected by machinery, 131, 132; in- 
crease by division of employments, 
155; cheapened by division of labor, 
159, 167; influence of liberty, 179; in- 
fluence of intelligence on, 180-182; 
effect of good morals on, 182; effect 
of good wages on, 188 ; effect of piece 
wages on, 184; how capital aids, 200, 
201 ; agricultural, nature of, 209. 

Productive Labor contrasted with 
service, 146. 

Productive Services, several kinds 
described, 147. 

Products defined, 31; utility of nat- 
ural, 101 ; cheapened by machinery, 
128; of intellectual labor, 136, 141; 
improved by division of labor, 165 ; 
of agriculture, 213; amount of crops 
in 1880, 216. 

Profit, described, 57 ; elements of, 58 ; 
in trade and transportation, 233; de- 
pends on use of goods, 248; its share 
in products, 317; proportion to risks, 
318 ; law of investment, 323. 

Property defined, 81 ; right of, ancient 
view, 286; society's rights in, 289; the 
nature of, 298 ; forms of, 294 ; agricult- 
ural, safety, and low profits of, 323. 
national property not economic, 326 ; 
taxable, 353. 

Protection, as opposed to free trade, 
362; defined, 363; the double ques- 
tion, 864; the doctrine of, 365; first 
postulate discussed, 366 ; second ditto, 
868; third ditto, 869; wisdom of, 369; 
objections to, 376; true questions of, 
878; the national question, 879; the 
question of fact, 881. 



(391). 



Ren 



INDEX. 



Sup 



Rent of houses a species of sale, 242. 

Rent of Land, paid for use of, 243; 
share of products, 313; "Metayer" 
system of, 314 ; Cottier system of, 314 ; 
two limits of, 314 ; Ricardo theory of, 
314-316. 

Representative Money described, 
274. 

Retail Trade, the skill required, 245. 

Ricardo on tendency of wages, 311; 
theory of rent, 315. 

Richards, Prof. G. K., says " all rulers 
are of necessity Pol. Economists," 
25. 

Right of Property, views of Montes- 
quieu, Benetham, Mirabeau, Robes- 
pierre, and Grotius, 286; modern 
view, 288. 

Risk, must be paid for in business, 
234; covered by insurance, 235; pro- 
portion to profits, 318. 

Rogers, Prof. J. E. T., title and scope 
of work, 27; remark on skill, 127. 

Roscher, Prof. Wm., defines Pol. Ec. 
as national and as general, 23; gives 
three elements to value, 44; state- 
ments of climatic influence, 100; af- 
firms value in nature's gifts (note), 
111; statements of labor-power of 
different people, 118; view of pro- 
ductive labor answered, 135; descrip- 
tion of fixed capita] criticised, 195. 

Rossi, Count, 15; recognized differ- 
ence between pure and applied Pol. 
Ec, 25. 

Rotation of Crops, disadvantages of 
improper rotation, 226. 

Rousseau, J. J., objection to civiliza- 
tion answered, 69. 



Sale, a form of exchange, 240. 

Savages, labor and tools of, 153 ; work 
of s. and civilized man compared, 
156; capital not separate, 197; labor 
for immediate wants, 199. 

Savings a secondary distribution of 
wealth, 322; investment of, 323. 

Say, J. Baptiste, proposed standard of 
values, 64; description of manager, 
138. 

Scholars, work of productive, 140; 
contributions of to industry, 140. 

Schools, division of labor in graded, 
173. 

Science, two definitions of, 25; comp. 
with common sense, 29 ; its division 
lines never fixed, 98. 

Science of Value, defined as pure eco- 
nomics, 18; its scope, 19; can not an- 
swer questions of Soc. Ec. or of Nat. 
Ec. 21 ; rise of this science, 24 ; con- 
troversies, three main questions in, 
24; these questions answered, 25. 

Science of Wealth, the title, by 
whom used, 15; preferred by feudal 
sentiment, 16. 



Self-employed Labor superior in ef- 
fectiveness, 184. 

Senior, N. W., counted scarcity an 
element of value, 35; def. of value, 
43. 

Service, the fourth field of work, 95; 
extent of, 96; defined— classes of, 145; 
the power of valuable, 146; con- 
trasted with productive labor, 146; 
compared with goods, 148 ; different 
wages of, 150 ; gratuitous, 151. 

Service Workers, their numbers sta- 
ted, 149; include theaters, etc., 150. 

Sickness, losses by, 119. 

Silk Manufacture, illustration of lux- 
ury, 320. 

Silver demonetized in U. S., 268; de- 
monetized by Germany, 269 ; price 
of in London, 269 ; its necessary use 
in coins, 270. 

Simon, Jules, effects of deferred wages, 
184. 

Single and Double Standard, discus- 
sion of, 268 ; battle of the standards, 
269. 

Skill, second factor in labor defined, 
122; three classes : naental, sense, and 
manual, 123; special and general, 
124 ; improved by education, 125 ; cost 
of— three causes, 125; machinery a 
substitute, 126; value of, compared 
with strength, 126; power of to aid 
strength, 126; remark of Prof. Rog- 
ers, 127; economy of, 161. 

Smith, Adam, title of book, 23: his 
phrase " value in use," criticised, 34; 
proposed standard of valvie, 64; on 
division of labor, 159; opinion on in- 
fiuence of good wages, 183 ; objection 
to piece M^ages, 184; counts skill as 
capital, 190; on taxation, 345. 

Social Economy, defined, 18; prop- 
erly a chap, of soc. sci., 20; problems 
of, 20; rise of, 25. 

Society, its right of property, 289 ; a 
silent partner, 290. 

Spencer, Herbert, on the nation, 333. 

Standard of value, 63; several stand- 
ards proposed, 64; compovmd or tab- 
ular, 64; utility of true standard, 65; 
difficulty of finding a constant 
standard, 66. 

Stewart, Dugald, on right of prop- 
erty, 289. 

Storeh, Henri, defines value as a judg- 
ment, 43. 

Sturtevant, Prest.,15; counts capac- 
ity to be possessed as element of 
value, 37. 

Superintendents, labor of described, 
138. 

Supplies, third form of capital, 190; 
what they include, 193. 

Supply, definition of, 78; reciprocal 
with demand, 79 ; laws of supply and 
demand, 80; effects of increased and 
diminished, 82; effect* of excessive 



Sus 



INDEX. 



Wan 



explained, 82; effect of diminution, 
84; Influence of prospective, 86. i 

Sustaining Class, proportion of toj? 
population in different countries,''^ 
116. 



Tariff, battle of, 362; definition of , 363; 
revenue, 363; protective, 363; power 
of, 369; wisdom of, 369. 

Taxables, 353. 

Taxation, of mortgages, double taxa- 
tion, 300; objects of, 341; right of, 
342; basis of, 342; systems of, 343; 
different views or modern system, 
344; difficulties in, 346; the unat- 
tainable in, 354 ; economic principles 
of, 357; national principles of, 358; 
limits of, 361. 

Taxes, definition of, 341 ; in the United 
States, 346; obstacles to assessment 
of, 346; to collection of, 347; direct, 
348; income, 349; indirect, their evils 
and advantages, 351, 352 ; equilibrium 
of, 356. 

Teachers, classed with intellectual 
laborers, 143 ; services of productive, 
147. 

Technical Schools, their influence on 
Industries, 141; substitutes for ap- 
prenticeship, 142; their uses shown, 
142. 

Territorial Distribution of Wealth, 
movement of, 324; second form of, 
324; 

Thompson, Prof. R. E., title of work, 
27. 

Thornton, denial of supply and de- 
mand, 80. 

Time-work, estimate of, 305. 

Tobacco, cost and consumption, 322. 

Tools, described as third factor in 
labor, 127 ; origin of tools, 127 ; com- 
pared with machines, 127 ; aid labor 
and skill, 128 ; economy of in divis- 
ion of labor, 162; improvements 
from division of labor, 163. 

Trade, domestic and foreign — eco- 
nomic differences, 247; advantages 
of foreign, 244; wholesale and retail, 
244; is it a tax? 246. 

Trade and Transportation, tabular 
view of, 228 ; needs and beneflts of, 
229; numbers engaged in, 231; skill 
required in, 231 ; capital required in, 
232. 

Transformations of Wealth, destruc- 
tive and productive, 329 ; agencies of, 
329 ; destruction by progress, 330 ; de- 
struction by bad morals, 330; from 
matter to mind, 331. 

Transportation, its necessity ex- 
plained, its character as an indus- 
try, 93 ; what products will pay, 108 ; 
usually implied in trade, 230 ; capi- 
tal invested in, 232 ; who pays it ? 238. 



Triangle of Value, its sides described, 



32 ; inscribed in the economic circle, 
40. 
Turgot, Baron, on tendency of wages. 



Utility, first element of value, 32; 
full sense of, 33; not to be con- 
founded with service, not vsynony- 
mous with value, 33 ; compared with 
effort and ownership under several 
aspects, 39; called positive value, 39; 
variations, two classes, 47; recipro- 
cal to want, 68; defined by relation 
to want, 68; free utilities not wealth, 
70 ; degree of in different values, 176. 



Value, natural history of, 30; several 
names for, 31; three requisites of, 31; 
triangle of, 32 ; complex nature of, 
32; the three elements all essential, 
38; value in trade depends on gen- 
eral desire and effort, 38; elements 
compared, 39; central in Pol. Ec, 40; 
three erroneous views of, 41; not 
mere exchangeability, 41 ; not a re- 
lation, 42; not a mere feeling, 42; sy- 
nonyms of value, 45 ; variations of, 
not variations in price, 46; varia- 
tions, cases, 49-52 ; individual value, 
55; market values, 56; measurement 
of two kinds, 60; relative measure- 
ment illustrated, 62 ; absolute meas- 
urement of, 63 ; standards of, 64 ; of 
land involves the notion of effort, 
110; of land often overestimated, 
110; in division of labor, 175; differ- 
ence of in three stages of labor, 176 ; 
produced by trade and transporta- 
tion, 233; comparison of in trade, 241. 



Wage-fund, theory of, 310. 

"Wages of different peoples, 118; re- 
duced by competition of manufac- 
turers, 133; advanced by machinery, 
130; paid for various services, 150; 
influence of on work, 183; piece and 
time wages, 184 ; rise as interest falls, 
203; increase of in England, 204; in- 
crease of in France, 205 ; two theories 
of, 304; piece and time wages, 305; 
share of products, 306 ; causes affect- 
ing rate of, 307; table of in Europe, 
309 ; the two limits of, 311. 

"Walker, Amasa, definition of fixed 
capital, 195; on taxation, 345, 349. 

"Walker, Francis A,, on tabular 
standard of value, 65 ; facts given by 
on labor power and wages, 118 ; view 
of business managers, 139; report on 
inci-ease of wealth, 203; answer to 
wage-fund, 311. 

"Wants, man's the impelling forces in 
industry, 11 ; relations to work and 
•wealth, 13; place in economic circle, 



(393) 



Way 



INDEX. 



Wor 



18; reciprocal to utilities, 67; de- 
scribed in its relation to utility, 68; 
vast extent of, 69 ; relation to civiliza- 
tion, 69; non-economic wants, 70; 
economic gratified only by labor, 70; 
estimation of, 71 ; classes of demand, 
wants, vital and non-vital, 72; phys- 
ical and mental, 72 ; immediate and 
future, 73; special and general, 74; 
primary and secondary, 75. 

Wayland, Prest. Francis, counted 
idea of possession as an element of 
value, 37; gives two elements of 
value, 44. 

"Wealth, the third elementary fact in 
Pol. Ec, 11; use of word in Pol. Ec, 
12, 45; relations to wants and work, 
13 ; relations illustrated by circle, 14 ; 
three aspects of, 188; undergoes con- 
stant changes, 195; increase of in 
America, 203 ; increases faster than 
population, 203; influence on de- 
mand for money, 261 ; general state- 



ment, 284 ; synopsis of topics, 285 ; of 
several nations, 295; forces of distri- 
bution, 301' consumption and sav- 
ing of, 319-323 ; of cities, 325 ; transfor- 
mations of, 329. 

^ATheat, average yield in U. S., 221. 

Wholesale Trade, the skill required. 
245. 

Women, their range of work and 
wages, 151. 

Woolen Manufactures, increase of in 
England, 166. 

Work, defined as a primary fact in 
Pol. Ec, 11 ; place in field of Pol. Ec. 
12; relations to want and wealth, 13 
wider in meaning than labor, 89 
field of, explicated, 89 ; four forms of, 
91; form changing classes of, 92 
place changing classes of, 93 ; inteL 
lectual, its classes, 94 ; its three fac 
tors, 97; three great forms explained, 
206; synoptic view of, 207; national 
work not economic, 335. 



(394) 



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